Interlocutory Foreclosure Orders and Lis Pendens Cancellations Are Not “Final Judgments” for Res Judicata: Commentary on Nationstar Mortgage, LLC v. Davis (2025 NY Slip Op 04253)

Introduction

This commentary examines the Second Department’s decision in Nationstar Mortgage, LLC v. Davis (2025 NY Slip Op 04253), which clarifies when the doctrines of res judicata (claim preclusion) and collateral estoppel (issue preclusion) bar later litigation in the context of mortgage and foreclosure disputes. The court held that an interlocutory order in a related foreclosure case—denying vacatur of a dismissal and canceling a notice of pendency—was not a final judgment “on the merits” and did not preclude a separate action to cancel and discharge of record a satisfaction of mortgage. The decision reinforces the formal requirements for preclusion and underscores that cancellation of a lis pendens does not, without more, adjudicate substantive property or lien rights.

Parties

Nationstar Mortgage, LLC (Plaintiff/Appellant): Successor to Federal National Mortgage Association (FNMA) and holder/servicer of the subject note and mortgage at relevant times.
Sheldon Davis (Defendant): Original mortgagor and grantee of the property.
108-44 Liverpool Street, LLC (Defendant/Respondent): Subsequent purchaser of the property from Davis in 2020.
Webster Business Credit Corporation (Defendant/Respondent): Assignee of a 2020 mortgage originally recorded by Wisdom Ventures, LLC against the property.

Core Issues

Whether a prior order in a related foreclosure action—denying vacatur of a dismissal and canceling a notice of pendency—precludes a later, separate action to cancel a recorded satisfaction of mortgage under the doctrines of res judicata or collateral estoppel.
Whether the Supreme Court properly dismissed Nationstar’s complaint on preclusion grounds without reaching other CPLR 3211(a) defenses and denied Nationstar’s CPLR 3211(c) cross-motion to convert to summary judgment.

Case Background and Procedural History (Key Timeline)

June 16, 2008: Sheldon Davis executes a $446,600 note to Golden First Mortgage Corp., secured by a mortgage on Queens real property. A deed (same date) purports to convey the property to Davis from Shelton Holt.
2009: Golden assigns the mortgage to FNMA. FNMA sues to foreclose, alleging default. Holt, separately, sues in a fraud action alleging his deed to Davis was forged. FNMA is named in the fraud action.
September 2011: FNMA assigns the note and mortgage to Nationstar (plaintiff).
October 20, 2011: The foreclosure action is joined for trial with the fraud action.
August 27, 2015 (Fraud Action): The court deems the 2008 deed to Davis void and declares Holt the lawful owner. The same day, Holt and Nationstar enter into a so-ordered stipulation acknowledging an equitable mortgage in favor of Nationstar, with agreed payment terms.
March 30, 2016 (Foreclosure Action): The court dismisses the foreclosure complaint without prejudice for failure to comply with a status conference order.
November 16, 2016 (Recorded Feb. 13, 2017): Nationstar records a satisfaction of mortgage acknowledging full payment and satisfaction.
November 7, 2019 (Fraud Action): The court grants Davis’s motion, in effect, to vacate the August 27, 2015 order deeming the deed void.
March 3, 2020 (Foreclosure Action): FNMA files a “renewal notice of pendency.”
March 17–23, 2020: Davis deeds the property to 108-44 Liverpool Street, LLC; Liverpool records a $700,000 mortgage in favor of Wisdom Ventures LLC, which assigns it to Webster Business Credit Corporation.
July 9, 2021 (Foreclosure Action): The Supreme Court denies FNMA’s motion to vacate the 2016 dismissal and restore the action, and grants Liverpool’s motion to cancel the 2020 notice of pendency.
April 2021 (New Action): Nationstar brings the present action seeking, inter alia, to cancel/discharge of record the satisfaction of mortgage nunc pro tunc to its filing date.
January 27, 2023 (Supreme Court): Grants Liverpool/Webster’s CPLR 3211(a) motion to dismiss on res judicata grounds and cancels the new lis pendens; denies Nationstar’s CPLR 3211(c) cross-motion.
July 23, 2025 (Appellate Division): Reverses the dismissal; holds res judicata/collateral estoppel inapplicable; remits for consideration of other grounds. In a related appeal decided the same day, the Appellate Division modifies the July 2021 order to vacate the 2016 dismissal and restore the foreclosure action, but affirms cancellation of the 2020 notice of pendency.

Summary of the Judgment

The Second Department reversed the Supreme Court’s order that had dismissed Nationstar’s complaint against Liverpool and Webster on res judicata grounds. The appellate court held:

The July 2021 order in the foreclosure action was not a final judgment “on the merits.”
The record did not show that the validity of the 2016 satisfaction of mortgage, or the parties’ respective rights in relation to that satisfaction, had been litigated and decided in the foreclosure case.
Accordingly, neither res judicata nor collateral estoppel barred Nationstar’s separate action to cancel the satisfaction of mortgage.
The matter is remitted for the Supreme Court to consider the defendants’ other CPLR 3211(a) defenses (which the court below did not reach) and to reconsider Nationstar’s CPLR 3211(c) cross-motion in light of those grounds.

Detailed Analysis

1) Precedents Cited and Their Role

Brody v RBC Mtge. Co., 215 AD3d 724 (2d Dept 2023): Reiterates that res judicata (claim preclusion) requires a prior judgment on the merits between the same parties (or those in privity) involving the same subject matter. The decision invokes Brody to stress the necessity of a “disposition on the merits” before claim preclusion can attach.
HSBC Bank USA, N.A. v Pantel, 179 AD3d 650 (2d Dept 2020): Emphasizes New York’s transactional analysis of claim preclusion: once a claim reaches a final conclusion, all claims arising out of the same transaction are barred—even if based on different theories. The court cites Pantel both to acknowledge the breadth of res judicata and to highlight that breadth is irrelevant absent a final judgment on the merits, which was missing here.
Matter of Hunter, 4 NY3d 260 (2005): The Court of Appeals’ leading articulation of New York’s transactional approach to res judicata, frequently cited to show that claim preclusion sweeps broadly once finality is present. Again, Hunter underscores what was not present—finality.
Bank of N.Y. Mellon v Treitel, 217 AD3d 911 (2d Dept 2023): States the elements of collateral estoppel: identity of issue actually litigated and decided, and a full and fair opportunity to litigate. The court relies on Treitel to explain why issue preclusion was also inapplicable: the satisfaction-of-mortgage issue had not been actually litigated or decided in the foreclosure action.
Johnson v 275 Clermont, LLC, 235 AD3d 731 (2d Dept [year as reported]): Supports remittal when the lower court has not addressed alternative bases for dismissal. The Appellate Division uses Johnson to justify sending the matter back so that the Supreme Court can evaluate the remaining CPLR 3211(a) grounds and Nationstar’s CPLR 3211(c) cross-motion.

2) The Court’s Legal Reasoning

The Second Department’s reasoning is methodical and turns on the two essential pillars of preclusion:

Finality for Res Judicata: The July 2021 order in the foreclosure action—denying vacatur of an earlier dismissal and canceling a notice of pendency—was not a “final judgment on the merits.” Orders of this type are interlocutory and procedural; they do not adjudicate the substantive validity of mortgage rights or the effect of a recorded satisfaction. Without finality, the first element of claim preclusion fails.
Identity of Issues for Collateral Estoppel: The record did not establish that the validity of the 2016 satisfaction of mortgage or the rights between Nationstar and the corporate defendants were “actually litigated and necessarily decided” in the foreclosure action. A cancellation of lis pendens or refusal to restore a case is not an adjudication of whether a recorded satisfaction was valid or should be nullified nunc pro tunc. Absent an adjudicated issue, issue preclusion cannot apply.

With both preclusion theories inapplicable, dismissal under CPLR 3211(a) on res judicata grounds was improper. The Appellate Division therefore reversed and remitted for the trial court to consider the other pleaded CPLR 3211(a) defenses (which had not been reached) and to revisit Nationstar’s CPLR 3211(c) request to convert to summary judgment thereafter.

3) What the Court Did Not Decide

The decision is careful to leave several substantive questions open:

The merits of Nationstar’s claim to cancel and discharge of record the satisfaction of mortgage nunc pro tunc.
The viability of any other CPLR 3211(a) defenses raised by Liverpool and Webster (e.g., documentary evidence, statute of limitations, failure to state a claim, capacity, or others), which the Supreme Court must assess on remand.
The effect of third-party rights and equities, including any bona fide purchaser/mortgagee arguments by Liverpool and Webster, and the interplay of those defenses with any retroactive relief Nationstar seeks.
The ultimate status and effect of the 2015 so-ordered equitable mortgage stipulation in the fraud action, which is not substantively resolved by this decision.

4) Impact and Practical Implications

This ruling carries significant consequences for foreclosure practice, title litigation, and transactional certainty in New York:

Preclusion Arguments Narrowed in Mortgage/Lien Disputes: Parties cannot invoke res judicata or collateral estoppel based on interlocutory orders in related actions unless there is (i) a final judgment on the merits (for claim preclusion), or (ii) a clear, actually litigated and decided issue with a full and fair opportunity to be heard (for issue preclusion). Orders canceling a notice of pendency, or procedural denials of vacatur/restoration, generally will not suffice.
Independent Actions to Vacate Satisfactions Remain Available: Even where a foreclosure action has encountered procedural setbacks (e.g., dismissals for noncompliance, canceled lis pendens), lenders may still pursue a separate action to correct the record and challenge a satisfaction as mistaken or otherwise invalid—subject to the merits and defenses to be adjudicated.
Third-Party Reliance on the Record is Not Automatically Dispositive: Subsequent purchasers or mortgagees cannot defeat such actions solely by pointing to earlier procedural orders in related cases; they must prevail on the merits of their defenses (e.g., bona fide purchaser status, equitable estoppel, statute of limitations, laches, or other statutory protections), which remain to be addressed on remand.
Lis Pendens Does Not Adjudicate Substantive Rights: The decision reinforces a familiar but sometimes overlooked point: cancellation of a notice of pendency is not a merits determination about lien validity or priority. Practitioners should avoid overreading pendency rulings as preclusive on substantive issues.
Strategic Litigation Management: For lenders and servicers, the case underscores the importance of maintaining action viability and clarity in the record—especially when recording a satisfaction amid parallel ownership or fraud disputes. For title insurers and transactional counsel, it flags the necessity of deeper diligence where satisfactions arise in a litigation-laden context.

Complex Concepts Simplified

Res Judicata (Claim Preclusion): Prevents relitigation of a claim after a final judgment on the merits between the same parties (or those in privity), where the subsequent claim arises from the same transaction. No final judgment on the merits = no res judicata.
Collateral Estoppel (Issue Preclusion): Bars relitigation of a specific issue that was actually litigated, necessarily decided, and where the party had a full and fair opportunity to litigate in the prior case. If the issue was not actually decided, collateral estoppel does not attach.
Notice of Pendency (Lis Pendens): A filing that alerts the public that litigation may affect title to real property. It is a procedural notice, not a determination of rights. Its cancellation does not resolve underlying substantive claims.
Satisfaction of Mortgage: A recorded instrument by which a mortgagee acknowledges that the secured debt has been paid and the mortgage lien is discharged. Under certain circumstances (e.g., mistake), a party may seek to vacate or cancel a satisfaction to restore the lien—subject to equitable and legal defenses, and with potential effects on third-party rights.
Equitable Mortgage: A court-recognized lien that arises from the parties’ intent or equitable considerations, even if formalities of a mortgage were not perfectly observed. Here, a 2015 stipulation acknowledged an equitable mortgage in favor of Nationstar; the ultimate effect and enforceability are beyond the scope of this decision.
CPLR 3211(a): New York’s rule for pre-answer motions to dismiss on specific grounds (e.g., documentary evidence, lack of capacity, statute of limitations, failure to state a cause of action). The trial court must address each ground raised; if it dismisses on one ground alone, appellate courts may remit for consideration of the remainder.
CPLR 3211(c): Allows a court, with adequate notice and a sufficient record, to treat a motion to dismiss as one for summary judgment and decide the merits. The Appellate Division directed the trial court to revisit Nationstar’s 3211(c) request after considering all 3211(a) grounds.
CPLR 6514: Governs cancellation of a notice of pendency. Cancellation concerns the pendency notice itself, not necessarily the validity of underlying claims or liens.
Nunc Pro Tunc: Latin for “now for then.” Relief entered nunc pro tunc makes the court’s order effective as of an earlier date. Here, Nationstar seeks to cancel the satisfaction retroactively to its filing date, a remedy with potential consequences for priority and third-party rights that the trial court must assess on remand.

Conclusion

Nationstar Mortgage, LLC v. Davis stands for a crisp and consequential proposition: interlocutory orders in related foreclosure litigation—particularly those canceling a lis pendens or denying vacatur/restoration—are not “final judgments on the merits” and do not, without explicit adjudication of the specific issue, preclude a later, separate action to cancel a recorded satisfaction of mortgage. By insisting on the formal elements of res judicata and collateral estoppel—finality and identity of actually decided issues—the Second Department preserves the ability of parties to pursue targeted record-correction relief while reserving for the trial court the task of weighing substantive defenses and equities.

The decision’s significance lies both in its doctrinal clarity and its practical guidance: preclusion is a precise tool, not a broad brush. Orders about lis pendens or procedural case posture do not resolve substantive property or lien rights, and parties—especially subsequent purchasers and mortgagees—must engage the merits, not just the optics, of the record. On remand, the Supreme Court will determine whether Nationstar can meet the demanding standards for canceling the satisfaction nunc pro tunc and how any third-party rights and statutory defenses affect that relief. Until then, Nationstar confirms that preclusion arguments premised on non-final, procedural rulings cannot short-circuit such claims.