Pandemic Delay as “Good Cause” Under CPLR 2004 and Limits on Interest Tolling in Foreclosure: Commentary on HSBC Bank, USA, N.A. v. Santella

I. Introduction

The Appellate Division, Second Department’s decision in HSBC Bank, USA, N.A. v. Santella, 2025 NY Slip Op 06607 (Nov. 26, 2025), is a foreclosure case that does more than simply affirm an order and judgment of foreclosure and sale. The court uses the case to:

Reinforce the preclusive consequences of failing to perfect a prior appeal (Bray/Rubeo doctrine);
Clarify standards for confirming a referee’s report without a hearing in mortgage foreclosure actions;
Apply CPLR 2004 to excuse the lender’s noncompliance with a six‑month deadline to move for a judgment of foreclosure and sale, explicitly recognizing COVID‑19 related delays as “good cause”;
Reaffirm that tolling or cancelling interest in foreclosure is an equitable, fact‑dependent remedy, generally unavailable where delay is explained and not solely attributable to the lender.

The defendants, Peter T. and Joann M. Santella, challenged the foreclosure on multiple grounds, including standing, compliance with RPAPL 1304, the accuracy and procedure surrounding the referee’s computation, alleged violation of the court’s six‑month directive to move for judgment, and a request to toll interest because of purported prosecution delays. The Second Department rejected each of these efforts and affirmed a judgment authorizing the sale of the Manhasset property.

II. Factual and Procedural Background

A. The Foreclosure Action

In March 2017, HSBC Bank, USA, N.A. commenced a foreclosure action against the Santellas and others to foreclose a mortgage on residential property in Manhasset, Nassau County. The opinion does not detail the underlying loan terms or specific default, but the case proceeds as a typical residential foreclosure:

Borrowers allegedly default on a mortgage loan;
The lender commences a foreclosure action seeking to foreclose the mortgage and sell the property;
The borrowers answer, raising defenses (including, here, challenges to standing, notices, and default).

B. The January 2019 Order of Reference and Striking of the Answer

The plaintiff moved for:

Summary judgment on the complaint as against the Santellas;
Striking the Santellas’ answer; and
An order of reference appointing a referee to compute the amount due.

In an order dated January 14, 2019 (the “January 2019 order”), the Supreme Court (Sullivan, J.):

Granted the plaintiff’s motion;
Struck the defendants’ answer;
Appointed a referee to compute the amount due; and
Included a directive that the plaintiff’s “failure to proceed with an application for a judgment of foreclosure and sale within six months may result in an order of dismissal.”

The defendants appealed from that order but did not perfect the appeal within the time prescribed by the rules. The appeal was therefore dismissed for lack of prosecution pursuant to 22 NYCRR 1250.10(a).

C. The 2023 Motion Practice and Order and Judgment of Foreclosure and Sale

After the referee performed the computation, the plaintiff moved in May 2023 to:

Confirm the referee’s report; and
Obtain a judgment of foreclosure and sale.

The defendants opposed and cross‑moved to:

Dismiss the complaint as against them (arguing, among other things, that the plaintiff failed to comply with the six‑month directive in the January 2019 order); or
In the alternative, toll the accrual of interest on the mortgage loan because of the delay.

In an order and judgment of foreclosure and sale dated October 30, 2023, the Supreme Court:

Granted the plaintiff’s motion;
Denied the defendants’ cross‑motion in all respects;
Confirmed the referee’s report; and
Directed sale of the property.

The defendants then appealed from the order and judgment of foreclosure and sale. That appeal produced the opinion under discussion.

III. Issues Before the Appellate Division

The Second Department addressed four core issues:

Effect of the dismissed earlier appeal: Could the defendants, on this later appeal from the order and judgment of foreclosure and sale, re‑argue issues (standing, RPAPL 1304 compliance, and default) that could have been raised in their earlier appeal from the January 2019 order, which was dismissed for lack of prosecution?
Confirmation of the referee’s report: Was confirmation proper where the referee did not give notice or hold a hearing, and where the plaintiff relied on an employee’s affidavit and business records to prove the amount due?
CPLR 2004 and the six‑month directive: Should the action have been dismissed for the plaintiff’s failure to move for a judgment of foreclosure and sale within six months of the January 2019 order, as that order warned?
Tolling of interest: Should the court, exercising its equitable powers in a foreclosure action, have tolled or cancelled interest on the mortgage loan because of alleged delay in prosecuting the case?

IV. Summary of the Court’s Decision

The Second Department affirmed the order and judgment of foreclosure and sale in all respects, holding:

Under Bray v Cox and Rubeo v National Grange, issues that could have been raised in the earlier appeal (standing, RPAPL 1304 compliance, proof of default) were barred on this subsequent appeal, given that the prior appeal was dismissed for lack of prosecution.
The referee’s report was properly confirmed: it was “substantially supported by the record,” particularly through an affidavit of a bank employee establishing the foundation for admission of business records showing the amounts due under CPLR 4518(a).
The referee’s failure to provide notice or hold a hearing did not warrant denial of confirmation because the defendants were not prejudiced; they had a full opportunity to submit evidence to the Supreme Court in opposing the motion to confirm.
Invoking CPLR 2004, the Supreme Court properly excused the plaintiff’s failure to move for a judgment of foreclosure and sale within six months. The delay was largely attributable to, among other things, the COVID‑19 pandemic, and the defendants failed to show prejudice.
The Supreme Court did not abuse its equitable discretion in refusing to toll interest. The record contained no evidence of bad faith or undue delay by the plaintiff; the delay was explained and was not solely within the plaintiff’s control.

V. Detailed Analysis

A. Preclusion after a Dismissed Appeal: Bray v Cox and Rubeo

1. The Governing Rule

The court begins by invoking a long‑standing doctrine: when a party appeals from an interlocutory order but allows that appeal to be dismissed for lack of prosecution, they generally cannot, on a subsequent appeal from a final judgment, raise issues that were or could have been raised in the dismissed appeal. The court cites:

Rubeo v National Grange Mut. Ins. Co., 93 NY2d 750;
Bray v Cox, 38 NY2d 350.

In Bray, the Court of Appeals announced a rule of practice designed to prevent “two bites at the apple”:

Once an appeal has been dismissed for failure to prosecute, the issues that could have been raised on that appeal are generally barred from review on a later appeal from a subsequent order or judgment in the same action.

Rubeo reaffirmed this principle, but also emphasized that appellate courts retain the inherent power to disregard this rule in appropriate circumstances and reach the merits in the interest of justice.

2. Application in Santella

The defendants previously appealed from the January 2019 order that:

Granted summary judgment to the plaintiff;
Struck their answer; and
Issued the order of reference.

They did not timely perfect that appeal, resulting in dismissal under 22 NYCRR 1250.10(a). On this later appeal from the order and judgment of foreclosure and sale, they attempted to raise:

The plaintiff’s lack of standing;
Non‑compliance with RPAPL 1304 (pre‑foreclosure 90‑day notice); and
Failure to establish the default.

The Second Department held that all of those arguments “could have been raised on the earlier appeal” from the January 2019 order. Invoking Bray and Rubeo, the court declined to exercise its jurisdiction to address those issues on this later appeal.

This has two important consequences:

Finality of interlocutory rulings: Where a party takes an appeal from an interlocutory order (such as an order granting summary judgment and striking an answer) and then allows that appeal to be dismissed, they usually forfeit the ability to re‑litigate those issues on a later appeal.
Foreclosure‑specific impact on standing and RPAPL 1304 defenses: Although standing and RPAPL 1304 compliance are often litigated vigorously in foreclosure cases, Santella demonstrates that they are still subject to ordinary appellate practice rules. If those issues were resolved adversely in an order that was the subject of a dismissed appeal, a borrower may well be precluded from raising them again at the judgment stage.

B. Confirmation of the Referee’s Report

1. Standard for Confirmation

In New York foreclosure practice, once summary judgment is granted, a referee is appointed to compute the amount due and, sometimes, to examine and report on whether the premises can be sold in parcels. The standard for confirming a referee’s report is relatively deferential. The court quotes:

“The report of a referee should be confirmed whenever the findings are substantially supported by the record, and the referee has clearly defined the issues and resolved matters of credibility.” (HSBC Mtge. Corp. USA v Jung Ae Lee, 228 AD3d 742, 742 [internal quotation marks omitted]; see U.S. Bank N.A. v Moschetta, 216 AD3d 848, 849.)

Thus, the reviewing court:

Does not require perfection or detailed evidentiary findings; but
Does require a rational and record‑based computation, with clear articulation of the issues resolved.

2. Use of Business Records and CPLR 4518(a)

The defendants attacked the referee’s calculation. The referee relied on an affidavit from Christopher Miranda, an employee of the plaintiff, who:

Attested to his familiarity with the plaintiff’s record‑keeping practices; and
Provided or sponsored business records evidencing the amounts due.

Under CPLR 4518(a), business records are admissible where a proper foundation is laid:

The records were made in the regular course of business;
It was the regular course of such business to make these records;
The records were made at or near the time of the event recorded; and
The foundation is established by a witness with knowledge of the business’s record‑keeping practices (not necessarily the person who made the entries).

The court held that Miranda’s affidavit “established a foundation for the admission of business records evidencing certain amounts due” (citing CPLR 4518[a] and Jung Ae Lee; Bank of N.Y. Mellon Trust Co., N.A. v Ahmed, 204 AD3d 972, 973). Accordingly, the referee’s report was “substantially supported by the record.”

3. No Hearing or Notice by the Referee

The defendants argued that the referee’s failure to:

Provide notice; and
Hold a hearing;

required denial of the motion to confirm. The Second Department rejected this argument, relying on:

Bank of N.Y. Mellon v Viola, 181 AD3d 767, 770;
Excel Capital Group Corp. v 225 Ross St. Realty, Inc., 165 AD3d 1233, 1236;
Wells Fargo Bank, N.A. v O’Brien, 234 AD3d 730, 732.

The rule distilled from these cases is:

As long as a defendant is not prejudiced by the inability to submit evidence directly to the referee, a referee’s failure to notify a defendant and hold a hearing is not, by itself, a basis to reverse a judgment of foreclosure and sale and remit the matter for a hearing and new determination of the amounts owed.

The court then notes:

“Where, as here, a defendant had an opportunity to raise questions and submit evidence directly to the Supreme Court, which evidence could be considered by the court in determining whether to confirm the referee’s report, the defendant is not prejudiced by any error in failing to hold a hearing.” (Bank of N.Y. Mellon v Viola, 181 AD3d at 770; see Wells Fargo Bank, N.A. v O’Brien, 234 AD3d 730, 732.)

Therefore, because the defendants:

Filed opposition papers to the motion to confirm; and
Had the opportunity to support their arguments with evidence before the Supreme Court;

they suffered no prejudice from the lack of a referee hearing. The confirmation was upheld.

C. CPLR 2004, the Six‑Month Directive, and Pandemic‑Related Delay

1. The Apparent Noncompliance

The January 2019 order warned that failure to move for a judgment of foreclosure and sale within six months “may result” in dismissal. The plaintiff did not actually move for a judgment of foreclosure and sale until May 2023—far outside that six‑month window.

The defendants relied on this noncompliance to argue that the complaint should be dismissed, invoking a policy articulated in Kihl v Pfeffer, 94 NY2d 118, 123:

“If the credibility of court orders and the integrity of our judicial system are to be maintained, a litigant cannot ignore court orders with impunity.”

2. The Safety Valve: CPLR 2004

However, CPLR 2004 provides a broad discretionary safety valve:

“Except where otherwise expressly prescribed by law, the court may extend the time fixed by any statute, rule or order for doing any act, upon such terms as may be just and upon good cause shown, whether the application for extension is made before or after the expiration of the time fixed.”

In exercising this discretion, courts look to factors including:

Length of delay;
Reason or excuse for the delay;
Any prejudice to the opposing party.

The court cites foreclosure and civil practice cases applying these principles:

Nationstar Mtge., LLC v Dunn, 230 AD3d 1327, 1329–1330;
Bank of N.Y. Mellon v Ramsamooj, 219 AD3d 1402, 1403;
Bank of Am., N.A. v Cord, 214 AD3d 934, 936;
Strong Is. Contr. Corp. v Padilla, 218 AD3d 820, 821.

These decisions underscore that even serious delays may be excused if:

A reasonable explanation exists; and
The adversary is not prejudiced in defending or otherwise protecting their interests.

3. COVID‑19 as “Good Cause”

The court held that the plaintiff demonstrated “good cause” for failing to move for judgment within six months. Crucially, it emphasized that:

“[T]he delay was largely attributable to, among other things, the COVID‑19 pandemic.”

The defendants did not claim that this delay prejudiced them. There was no evidence that:

The delay impaired their ability to defend the action (e.g., loss of evidence, witnesses, or defenses); or
They relied on the six‑month directive to their detriment.

Accordingly, the Appellate Division concluded that the Supreme Court had, in effect, exercised its authority under CPLR 2004 to extend or excuse compliance with the six‑month directive and that doing so was a provident exercise of discretion.

Substantively, this affirms an important principle for foreclosure litigation in the post‑pandemic environment:

COVID‑19 related delays in prosecuting foreclosure actions can constitute “good cause” under CPLR 2004, particularly when court operations were limited or stayed and when there is no showing of prejudice to the borrower.
Court‑imposed timing directives (“may result in dismissal”) are serious, but not absolute; CPLR 2004 permits courts to tailor consequences in light of real‑world disruptions.

D. Equitable Discretion and the Refusal to Toll Interest

1. Interest as an Equitable Remedy in Foreclosure

Foreclosure is an equitable proceeding. The court quotes:

“‘A foreclosure action is equitable in nature and triggers the equitable powers of the court.’” (Onewest Bank, FSB v Kaur, 172 AD3d 1392, 1393–1394, quoting Rajc v Faust, 165 AD3d 716, 717.)

In equitable actions, the award and calculation of interest is not automatic. The court continues:

“‘In an action of an equitable nature, the recovery of interest is within the court’s discretion. The exercise of that discretion will be governed by the particular facts in each case, including any wrongful conduct by either party.’” (Onewest Bank, FSB v Kaur, 172 AD3d at 1394, quoting BAC Home Loans Servicing, L.P. v Jackson, 159 AD3d 861, 862.)

Courts have sometimes:

Tolled (paused) or cancelled the accrual of interest where there is:
- Unexplained, prolonged delay in prosecution of the foreclosure; or
- Bad faith or dilatory tactics by the lender.

The Second Department references:

Deutsche Bank Trust Co. Ams. v Knights, 231 AD3d 1016, 1018 (tolling and cancellation of interest may be warranted where there is an “unexplained delay” in prosecuting a foreclosure);
Wells Fargo Bank, N.A. v Abakporo, 221 AD3d 939, 940 (no evidence of bad faith or undue delay);
Bank of N.Y. Mellon v George, 186 AD3d 661, 664 (delay not solely attributable to the plaintiff).

2. Application to the Santellas’ Request for Tolling

The defendants argued that interest should be tolled due to the plaintiff’s delay in moving to confirm the referee’s report and obtain judgment. The court rejected that argument based on two critical findings:

No bad faith or undue delay: “The record contains no evidence of bad faith or undue delay on the part of the plaintiff” (Abakporo, 221 AD3d at 940).
Delay adequately explained and not solely attributable to the plaintiff: The delay was “explained as having been caused by, among other things, the COVID‑19 pandemic” and was “not solely due to the actions of the plaintiff or solely within the plaintiff’s control” (citing Abakporo; George, 186 AD3d at 664).

Without evidence of:

Wrongful conduct;
Unexplained or intentional stalling; or
Unfair prejudice to the borrower;

the Appellate Division concluded that it was a proper exercise of discretion to deny tolling of interest.

This underscores that while equitable powers allow courts to relieve borrowers from the harsh consequences of interest accrual in some cases, such relief is exceptional and fact‑specific. Mere passage of time, especially where partially explained by system‑wide disruptions like COVID‑19, will usually not suffice.

VI. Simplifying Key Legal Concepts

1. Order of Reference and Referee’s Role

An order of reference in foreclosure:

Follows a grant of summary judgment to the lender; and
Appoints a referee to:
- Compute the amount due under the mortgage (principal, interest, fees, etc.); and sometimes
- Report whether the property can be sold in parcels.

The referee’s report is then submitted to the court. The lender typically moves to “confirm” the report and obtain a judgment of foreclosure and sale. Borrowers may object to the referee’s calculations at that stage.

2. CPLR 4518(a): Business Records Exception

The business records exception to the hearsay rule (CPLR 4518[a]) allows records to be admitted without calling every person who made each entry. The sponsoring witness must:

Be familiar with the business’s record‑keeping practices; and
Testify (or attest, via affidavit) that the records were made and kept in the regular course of business.

In foreclosure cases, this allows a bank employee or servicer to introduce payment histories, loan records, and default notices without producing every individual who processed a payment or generated a letter.

3. CPLR 2004: Extending Time Limits

CPLR 2004 gives courts flexible power to extend deadlines set by:

Statute;
Court rules; or
Court orders.

Extensions can be granted even after a deadline has expired if:

“Good cause” is shown; and
The extension is “just” under the circumstances.

Relevant considerations include length of delay, explanation for the delay (here, COVID‑19), and prejudice to the opposing party.

4. RPAPL 1304 and Standing (Procedural Posture Only)

Although the court did not reach the merits of the defendants’ arguments on:

Standing (whether the plaintiff was the proper party entitled to enforce the note and mortgage); and
RPAPL 1304 (the 90‑day pre‑foreclosure notice required for certain home loans);

it is important to note why: those issues were properly raised—and decided—at the summary judgment and order of reference stage, and could (and should) have been raised on the earlier appeal from the January 2019 order. By not perfecting that appeal, the defendants lost the opportunity to obtain appellate review of those issues, and Bray/Rubeo preclusion applied.

5. Equitable Tolling or Cancellation of Interest

In equity, courts can:

Reduce;
Pause (“toll”); or
Cancel

the accrual of interest in unusual situations—typically where:

The lender has acted in bad faith or in an unduly dilatory fashion; or
There is an unexplained, excessive delay causing unfair financial burden on the borrower.

Santella reinforces that the threshold is high: explanation for delay (here, pandemic‑related) and the absence of lender misconduct usually preclude such extraordinary relief.

6. Dismissal of Appeals for Lack of Prosecution (22 NYCRR 1250.10[a])

Under 22 NYCRR 1250.10(a), an appeal can be dismissed when the appellant:

Fails to timely “perfect” the appeal—i.e., fails to file the record, briefs, and other required papers within the prescribed time.

Once dismissed for lack of prosecution, that appeal generally cannot be revived, and issues that could have been raised on it may be barred in subsequent appeals relating to the same order or issues. That is what happened here.

VII. Broader Impact and Future Implications

A. For Borrowers and Their Counsel

Strict consequences for failure to perfect appeals: If a borrower appeals from a key interlocutory order (e.g., granting summary judgment to the bank, striking an answer, or determining standing/RPAPL 1304 compliance), that appeal must be timely perfected. A dismissal for lack of prosecution can effectively lock in the adverse rulings and preclude those issues from being re‑argued later.
Referee hearing challenges are disfavored absent prejudice: Borrowers cannot rely solely on the lack of a referee hearing or notice to overturn computations. They must show actual prejudice—such as being deprived of any meaningful opportunity to present objections or evidence to the court.
Interest tolling remains exceptional: Requests to toll or cancel interest will require a strong evidentiary showing of bad faith or unexplained delay by the lender, not just the existence of a long‑running case.

B. For Lenders and Their Counsel

CPLR 2004 as a shield against dismissal for timing lapses: Santella confirms that failures to meet court‑imposed deadlines (like a six‑month directive to move for judgment) are not automatically fatal where a reasonable excuse—especially COVID‑related disruption—is shown and no prejudice to the borrower is demonstrated.
Importance of competent business‑records affidavits: The court’s reliance on the Miranda affidavit underscores the continued centrality of CPLR 4518(a) in foreclosure. Robust, well‑founded business‑records affidavits remain critical to sustaining referee computations and foreclosure judgments.

C. Systemic Perspective: Post‑Pandemic Foreclosure Dockets

This decision is part of a broader pattern in which New York appellate courts:

Acknowledge the extraordinary disruptions caused by the COVID‑19 pandemic;
Use CPLR 2004 to avoid harsh dismissals for procedural noncompliance attributable to that period; and
Nevertheless insist on some explanation and an absence of prejudice before excusing long delays.

At the same time, the decision promotes:

Finality of earlier unreviewed foreclosure rulings; and
Efficiency in processing post‑reference foreclosure motions without mandatory hearings, provided borrowers have a meaningful opportunity to be heard on papers.

VIII. Conclusion

HSBC Bank, USA, N.A. v. Santella does not revolutionize foreclosure law, but it crystallizes several important principles in a clear, post‑pandemic context:

Appeals must be prosecuted diligently: The Bray/Rubeo doctrine precludes borrowers from revisiting issues such as standing and RPAPL 1304 compliance when they have allowed an earlier appeal from a dispositive order to be dismissed for lack of prosecution.
Referee proceedings are largely paper‑driven, subject to prejudice review: Lack of a hearing or notice by the referee will not, standing alone, defeat a foreclosure judgment where borrowers had a full opportunity to challenge the report before the court.
CPLR 2004 provides a flexible mechanism to address pandemic‑era delays: Courts may excuse noncompliance with court‑imposed deadlines, including six‑month directives for moving for a judgment of foreclosure and sale, when COVID‑19 and related disruptions materially contributed to the delay and when borrowers are not prejudiced.
Equitable tolling of interest is reserved for egregious cases: Without evidence of bad faith or unexplained, lender‑driven delay, courts will typically allow contractual interest to accrue even over long procedural timelines.

Taken together, these principles confirm a foreclosure landscape in which appellate practice discipline, evidentiary rigor, and equitable discretion—especially in response to pandemic‑related disruptions— shape the outcomes as much as the underlying loan documents themselves.