Interest-of-Justice Extensions After Defective Foreclosure Service: Second Department Confirms CPLR 306-b Relief Absent Judgment and Reaffirms Necessity of Joining the Borrower/Fee Owner

Introduction

In Rhoe v. Reid (2025 NY Slip Op 04117), the Appellate Division, Second Department addressed two recurring issues in New York foreclosure practice: (1) what happens when service of process under CPLR 308(2) is attempted at a mortgaged premises that is not the borrower’s dwelling or usual place of abode; and (2) whether, after a traverse hearing results in dismissal for lack of personal jurisdiction, a foreclosure plaintiff can still obtain an extension of time to serve under CPLR 306-b in the “interest of justice,” particularly when the statute of limitations has since expired.

The case arises from two related actions filed in Nassau County: Action No. 1 (conversion and fraud) and Action No. 2 (a mortgage foreclosure). The foreclosure plaintiff, Bank of New York Mellon Trust Company, N.A. (the Bank), attempted “suitable age and discretion” service on Patricia Reid (the borrower and fee owner) at the mortgaged premises by handing the papers to occupant Sheryl Rhoe and mailing them the next day. Rhoe testified that the borrower did not live there and that she refused and returned the papers. The Supreme Court credited Rhoe’s testimony, held that the premises was not the borrower’s dwelling or usual place of abode, dismissed for lack of personal jurisdiction, and then dismissed the balance of the foreclosure against the remaining defendants under RPAPL 1311 and CPLR 1001 because the fee owner had not been properly joined.

The Bank later moved to extend time to serve under CPLR 306-b, invoking the “interest of justice” standard. The motion was denied. On appeal, the Second Department affirmed the jurisdictional rulings but modified to grant the Bank a CPLR 306-b extension, even though the statute of limitations had expired and service was previously found defective.

Summary of the Judgment

• Service under CPLR 308(2) was invalid because the mortgaged premises was not the borrower’s usual place of dwelling or abode, and the trial court’s credibility determination in favor of the occupant (Rhoe) was entitled to appellate deference. The denial of default judgment and the dismissal for lack of personal jurisdiction were affirmed.
• Once the borrower/fee owner was dismissed for lack of personal jurisdiction, the foreclosure could not proceed against the remaining defendants. Dismissal under RPAPL 1311 and CPLR 1001/1003 was affirmed.
• Despite the dismissal order and the expiration of the statute of limitations, the action remained pending because no judgment had been entered. The Appellate Division held that the court should have granted an extension of time to serve the borrower in the “interest of justice” under CPLR 306-b and modified the order to grant that relief.

Detailed Analysis

Precedents Cited and How They Shaped the Decision

1) Service of Process under CPLR 308(2)

• Everbank v Kelly, 203 AD3d 138: Reinforces that CPLR 308(2) service requires both delivery to a person of suitable age and discretion at the defendant’s actual dwelling/usual place of abode or actual place of business, and a proper mailing; failure on either prong defeats jurisdiction. The Second Department quotes its holding that service is invalid if the service address is not the defendant’s actual dwelling or business.
• Hudson Val. Bank, N.A. v Eagle Trading, 208 AD3d 648: Echoes Everbank; invalid if address is not truly the defendant’s place of business or abode.
• Federal Natl. Mtge. Assn. v Smith, 219 AD3d 938: Clarifies burden at a traverse hearing—plaintiff must establish personal jurisdiction by a preponderance of credible evidence.
• U.S. Bank N.A. v Aoudou, 189 AD3d 1301; Wells Fargo Bank, N.A. v Barasch, 188 AD3d 955; Bank of Am., N.A. v Genzler, 188 AD3d 634; Grand Pac. Mtge. Corp. v Pietranski, 175 AD3d 1503: These cases underscore appellate deference to the trial court’s credibility findings in service disputes. The Second Department relies on this line to uphold the Supreme Court’s acceptance of Rhoe’s testimony over the process server’s account.

2) Necessary Party Doctrine in Foreclosure

• RPAPL 1311(1) and CPLR 1001/1003: The borrower/fee owner is a necessary party to a foreclosure. If the owner is dismissed for want of jurisdiction, the action cannot continue against others.
• Williams v St. John’s Episcopal Hosp., 173 AD3d 1117; LaSalle Bank N.A. v Benjamin, 164 AD3d 1223; Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d 400: Collectively support the rule that foreclosure must be dismissed when the necessary party (fee owner) is not properly before the court.

3) Extensions of Time to Serve under CPLR 306-b

• Wells Fargo Bank, N.A. v Ciafone, 188 AD3d 957; U.S. Bank N.A. v Bindra, 217 AD3d 719; Wells Fargo Bank, N.A. v Kaul, 180 AD3d 956; Feng Li v Peng, 190 AD3d 950; HSBC Bank USA, N.A. v Labin, 232 AD3d 861; Wilmington Sav. Fund Socy., FSB v James, 174 AD3d 835; Wells Fargo Bank, N.A. v Barrella, 166 AD3d 711: These authorities describe the “good cause” versus “interest of justice” dichotomy under CPLR 306-b. Even absent good cause, courts must engage the flexible “interest of justice” standard and balance factors, including diligence, the statute of limitations, meritorious claims, length of delay, promptness in seeking relief, and prejudice. No single factor is determinative.
• Earle v Valente, 302 AD2d 353: Confirms that CPLR 306-b’s extension power applies where service was timely attempted but later found defective—precisely this scenario.
• HSBC Bank USA, N.A. v Rubin, 210 AD3d 73; Bayview Loan Servicing, LLC v Chaudhury, 188 AD3d 1128; State of New York Mtge. Agency v Braun, 182 AD3d 63; Jhang v Nassau Univ. Med. Ctr., 140 AD3d 1018: Establish that when no judgment of dismissal has been entered, the action remains pending and an extension may be sought and, as appropriate, granted. They also demonstrate granting extensions where a meritorious claim exists, timely commencement occurred, the statute of limitations expired post-commencement, and there is no prejudice.
• Wells Fargo Bank, N.A. v Ben-Aron, 231 AD3d 1194; PNC Bank, N.A. v Sarfaty, 225 AD3d 721: Recent applications of the “interest of justice” standard to permit extensions in foreclosure contexts with no prejudice to the defendant.

Court’s Legal Reasoning

A. Service of Process: CPLR 308(2) Requirements and the Traverse Finding

The Bank sought to default the borrower based on “suitable age and discretion” service at the premises, coupled with a mailing. At the traverse hearing, however, the occupant testified that (a) the borrower did not live at the premises, (b) she refused to accept service on the borrower’s behalf, and (c) she handed the papers back to the process server. The trial court credited the occupant’s account and found the premises was not the borrower’s dwelling or usual place of abode.

Under Everbank v Kelly and related cases, CPLR 308(2) is strictly construed: the address where delivery is made must actually be the defendant’s dwelling/usual place of abode or actual place of business, and the mailing must be proper. Because the Bank did not prove the premises was the borrower’s abode, the delivery—and thus the service—failed. Deference to the trial court’s credibility determinations compelled affirmance.

Consequences followed directly: no valid service means no personal jurisdiction; without jurisdiction, no default judgment may enter against the borrower.

B. Necessary Party Doctrine: RPAPL 1311 and CPLR 1001/1003

Once the borrower/fee owner was dismissed for lack of personal jurisdiction, the action could not continue against the remaining defendants (e.g., junior lienors, occupants). The borrower, as fee owner, is a necessary party in foreclosure. The Second Department affirmed dismissal of the balance of the foreclosure complaint under RPAPL 1311 and CPLR 1001/1003, consistent with Williams, LaSalle Bank, and Polish Natl. Alliance.

C. CPLR 306-b Extension: The “Interest of Justice” Analysis and Procedural Posture

The Bank did not argue “good cause.” Therefore, the appellate court evaluated only the “interest of justice” basis. Several points drove the outcome:

• Pending Action: No judgment dismissing for lack of personal jurisdiction had been entered. The action therefore remained pending, and the Bank was not foreclosed from seeking an extension (Rubin; Bayview Loan; Braun).
• Applicable Even to Defective Timely Service: CPLR 306-b relief applies where service was made within the 120-day period but later found defective (Earle v Valente).
• Balancing Factors Supported Extension:
  • Meritorious claim: The Bank showed a potentially meritorious foreclosure claim.
  • Timely commencement: The action was timely when filed and service was attempted timely.
  • Statute of limitations: It had expired by the time the Bank moved for the extension—favoring relief to avoid forfeiture of claims based on service defects.
  • Prejudice: No demonstrable prejudice to the borrower; notably, the borrower did not oppose the extension motion.
  • Diligence is not dispositive under “interest of justice,” though it may be considered among other factors (Kaul; Feng Li; Bindra; Labin).

On this record, the Second Department modified the order to grant the 306-b extension. Importantly, the court did not disturb the earlier dismissal for lack of jurisdiction; instead, it provided a pathway for the Bank to effectuate proper service going forward in the pending action.

Impact and Practical Implications

1) For Foreclosure Plaintiffs and Their Counsel

• Traverse defeats do not necessarily end the case if no judgment has been entered. Plaintiffs can still pursue CPLR 306-b extensions “in the interest of justice,” even after the statute of limitations has run, when service was timely attempted but later found defective.
• Courts will weigh the absence of prejudice and the presence of a potentially meritorious foreclosure claim heavily, especially when a dismissal would otherwise hand the defendant a purely technical victory after timely commencement.
• However, failure to prove that the service address is the borrower’s actual dwelling or place of business remains fatal to jurisdiction. Foreclosure plaintiffs should rigorously document residence evidence (e.g., DMV records, utility bills, sworn neighbor/occupant statements, surveillance notes) before resorting to CPLR 308(2).
• When a traverse hearing is ordered, be prepared with corroborative proof beyond the process server’s affidavit to establish the defendant’s abode.

2) For Borrowers/Owners and Occupants

• An occupant’s credible testimony that the borrower does not live at the premises can defeat CPLR 308(2) service. Courts defer to the trial judge on credibility.
• Even after a successful traverse, lenders may still obtain 306-b extensions if no judgment is entered. Borrowers who want finality should consider steps that bring the case to judgment, or be ready to demonstrate prejudice if opposing extensions.

3) For Trial Courts

• When “good cause” is not shown under CPLR 306-b, courts must still analyze the “interest of justice” standard and balance the relevant factors; denial without such analysis risks reversal or modification.
• Where service was timely attempted but later deemed defective and the statute of limitations has since expired, the remedial purpose of 306-b supports flexible, equitable extensions absent prejudice.

4) For Process Servers

• “Suitable age and discretion” service is not a cure-all; it must occur at the defendant’s actual dwelling/place of business. Contemporaneous documentation of how the server verified the address is critical.
• If an occupant rejects papers and returns them, the decisive question remains whether the location qualifies as the defendant’s abode; the mere act of “leaving” may not help if the address is wrong.

Complex Concepts Simplified

• CPLR 308(2): A method of personal service allowing delivery to a person of suitable age and discretion at the defendant’s actual dwelling or business, plus a follow-up mailing. Both delivery at the correct type of address and the mailing must be proper.
• Traverse Hearing: A hearing to determine whether service of process was properly made. The plaintiff bears the burden of proving valid service by a preponderance of credible evidence.
• Personal Jurisdiction: The court’s authority over a party. Without valid service of process, the court lacks personal jurisdiction and cannot render a default judgment.
• Necessary Party (CPLR 1001; RPAPL 1311): A person whose rights are so connected to the subject of the action that the court cannot grant complete relief without them. In foreclosure, the fee owner/borrower is a necessary party. Without them, the action cannot proceed against others.
• CPLR 306-b “Good Cause” vs “Interest of Justice”: “Good cause” typically requires evidence of diligent efforts to serve. The “interest of justice” is broader and allows the court to weigh multiple factors—merits, statute of limitations, delay, prejudice—without requiring strict diligence.
• Statute of Limitations in Foreclosure: The period within which a foreclosure action must be commenced (often six years from acceleration). If it expires while service issues are being litigated, courts may still grant a 306-b extension to avoid forfeiture where equitable factors favor relief.

Conclusion

Rhoe v. Reid is a significant procedural decision at the intersection of service of process and foreclosure practice. It reiterates that:

• CPLR 308(2) must be strictly observed—delivery must occur at the defendant’s actual dwelling or business, with proper mailing; credibility findings at traverse are afforded strong deference on appeal.
• The borrower/fee owner is indispensable in foreclosure; without personal jurisdiction over the owner, the action cannot continue against other defendants.
• Even after a traverse defeats service and the statute of limitations expires, CPLR 306-b’s “interest of justice” safety valve remains available—especially where service was timely attempted but found defective, the action was timely commenced, the defendant is not prejudiced, and the plaintiff has a potentially meritorious claim. The absence of a judgment of dismissal keeps the action “pending” and permits such relief.

The decision will guide trial courts and practitioners in balancing fairness and finality: it ensures that meritorious foreclosure claims are not irretrievably lost to technical service missteps, while also enforcing strict adherence to jurisdictional requirements and protecting the due process rights of borrowers.