Actual Notice Supersedes Notice-of-Pendency: Binding Successors in Foreclosure Actions

Introduction

East Fork Funding LLC v. Deutsche Bank National Trust Company (2nd Cir. 2025) clarifies the interplay between New York’s common-law rule of actual notice and its statutory notice-of-pendency (lis pendens) regime in mortgage foreclosures. East Fork Funding LLC (“East Fork”) bought a Staten Island condominium unit in 2016 without filing parties’ names in the underlying 2009 foreclosure action. Deutsche Bank, holder of the senior mortgage, had duly recorded its mortgage but allowed its formal notice of pendency to lapse in 2015. In 2021 East Fork sued to discharge that mortgage under RPAPL § 1501(4), alleging the limitations period had run. Deutsche Bank revived its long-dormant foreclosure, obtained judgment in 2022, purchased the property at sale, and pursued a strict foreclosure to quash East Fork’s redemption rights. The Second Circuit affirmed the district court’s dismissal of East Fork’s quiet-title claim, holding that a purchaser with actual knowledge of a pending foreclosure is bound by its outcome—even if the statutory notice of pendency has expired.

Summary of the Judgment

The Second Circuit, sitting in summary order, affirmed dismissal of East Fork’s complaint. The panel held:

Deutsche Bank timely filed a foreclosure action in 2009 and elected acceleration of the debt, triggering the six-year limitations period under N.Y. C.P.L.R. § 213(4).
East Fork purchased the property in 2016, did not allege lack of actual notice of the foreclosure, and did not plead around its binding effect.
Although Deutsche Bank’s formal notice of pendency lapsed in 2015, the common-law rule binds any purchaser with actual notice of the pending litigation.
Because East Fork failed to allege it lacked such knowledge, it could not show that the statute of limitations barred Deutsche Bank’s mortgage enforcement.
The district court rightly dismissed East Fork’s RPAPL § 1501(4) claim and denied reconsideration.

Analysis

Precedents Cited

The court relied on two bodies of law—common-law actual notice principles and New York’s notice-of-pendency statutes:

Da Silva v. Musso (N.Y. 1990): Under common law, a purchaser with actual notice of pending litigation is bound by its outcome, regardless of statutory notice.
In re Sakow (N.Y. 2002): New York’s notice-of-pendency regime replaced the harsh common-law lis pendens rule as to constructive notice, but did not abolish the separate common-law rule on actual notice.
Recent state decisions (e.g., Wells Fargo Bank v. Rodriguez, Morequity, Inc. v. Centennial Ins. Co.) reaffirm that lack of a valid statutory notice does not shield a buyer who had actual knowledge of the foreclosure.

Legal Reasoning

The Second Circuit’s de novo review distilled the following principles:

Timeliness of the Foreclosure Action. Deutsche Bank properly accelerated the debt in 2009 and filed within six years, satisfying N.Y. C.P.L.R. § 213(4).
Common-Law Actual Notice. Even absent a current lis pendens, purchasers with actual awareness of litigation must take property subject to its outcome. A search of public filings is immaterial if the plaintiff proves actual knowledge.
Statutory Notice-of-Pendency. The C.P.L.R. §§ 6501–6515 regime governs constructive notice only. It streamlines title searches by limiting constructive notice to recorded filings, but it does not alter the reach of common-law actual notice.
Pleadings Defect. East Fork never alleged its lack of actual notice at the 2016 purchase. Under RPAPL § 1501(4), the plaintiff must show the limitations period expired and that the plaintiff is not bound by any pending or final foreclosure proceeding. East Fork failed on both counts.
Preclusive Effect of Judgment. When Deutsche Bank secured a final foreclosure and sale judgment in 2022, East Fork’s claim became doubly barred: (a) the underlying action was no longer “pending” and (b) East Fork, as a successor who had actual notice, was in privity and bound by the judgment.

Impact

This decision carries significant implications:

It underscores that buyers must conduct due diligence beyond real‐estate filings. Even if statutory notices of pendency lapse, actual knowledge of foreclosure proceedings binds subsequent purchasers.
Mortgagees gain comfort that timely foreclosures cannot later be undone by junior‐lien purchasers who failed to press intervention or challenge when the action was active.
Plaintiffs seeking quiet‐title under RPAPL § 1501(4) must address both the limitations period and their own notice status. Absent a clear no-notice allegation, such claims are vulnerable to early dismissal.
Loan servicers and trustees should monitor lis pendens expirations carefully, but also maintain robust notice programs to establish actual notice or join all potential claimants.
State courts deciding subsequent strict-foreclosure or reforeclosure filings will likely follow East Fork when assessing privity and binding effect on non-party purchasers with actual knowledge.

Complex Concepts Simplified

1. Lis Pendens vs. Actual Notice:

Lis Pendens: A recorded notice that alerts all title‐searchers to ongoing litigation affecting property. If live, it binds even those who never saw the court file.
Actual Notice: When a buyer truly knows about a foreclosure lawsuit, regardless of any recorded lis pendens. Under common law, that knowledge alone subjects them to the lawsuit’s result.

2. RPAPL § 1501(4): A statute enabling a property owner or successor to quiet title if “the period allowed by the applicable statute of limitation for” a mortgage foreclosure has expired—provided they are not bound by any action to foreclose that mortgage.

Conclusion

East Fork Funding LLC v. Deutsche Bank National Trust Company clarifies that New York’s notice-of-pendency statutes protect innocent purchasers lacking any knowledge of pending litigation but do not free those who actually know of a foreclosure from its consequences. The Second Circuit held that, on the unchallenged record, East Fork failed to plead it lacked notice when it bought the property, thus binding it to Deutsche Bank’s timely and ultimately successful foreclosure. Buyers and their counsel must now ensure they investigate both public filings and any other indications of pending foreclosure, or risk being bound by suits they knew were underway. The case reinforces the interplay between statutory and common-law notice doctrines, and it will guide litigants in foreclosure and quiet-title actions for years to come.