NDF1, LLC v. Cunningham

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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NDF1, LLC,

Plaintiff, REPORT AND

RECOMMENDATION

v.

24-CV-2

DALTON CUNNINGHAM; QUEENS CAPITAL (Merle, J.)

HOLDINGS, LLC; CONSOLIDATED EDISON (Marutollo, M.J.)

COMPANY OF NEW YORK; CITY OF NEW YORK

ENVIRONMENTAL CONTROL BOARD; NEW

YORK CITY DEPARTMENT OF FINANCE; MARCIA

GRAHAM,

Defendants.

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JOSEPH A. MARUTOLLO, United States Magistrate Judge:

On January 2, 2024, Plaintiff NDF1, LLC, initiated this foreclosure action against

Defendants Dalton Cunningham (“Cunningham”); Queens Capital Holdings, LLC (“Queens

Capital”); Consolidated Edison Company of New York (“Con Edison”); City Of New York

Environmental Control Board (“ECB”); New York City Department of Finance (“DOF”); and

“John Doe” and “Jane Doe” to foreclose on the property located at 142-21 230th Place, Rosedale,

New York 11422 (the “Property”). See generally Dkt. No. 1. On March 27, 2024, Plaintiff moved

to substitute Marcia Graham for John Doe and Jane Doe in the case caption. Dkt. No. 36. The

Court granted Plaintiff’s motion on March 27, 2024, and the case caption was amended

accordingly. See Mar. 27, 2024 Dkt. Order.

Queens Capital and Cunningham have responded to the Complaint and are currently

engaged in discovery. Non-mortgagor Defendants Graham, Con Edison, ECB, and DOF

(collectively, “Defaulting Defendants”) have not responded to the complaint. See Dkt. Nos. 33,

41. Currently pending before this Court, on a referral from the Honorable Natasha Merle, United

States District Judge, is Plaintiff’s motion for default judgment against Defaulting Defendants.

See Dkt. No. 43; see also May 16, 2024 Dkt. Order. For the reasons set forth below, this Court

respectfully recommends that Plaintiff’s motion for default judgment be DENIED.1

I. Background

A. Factual Allegations

The following facts are taken from the complaint, Plaintiff’s motion, and the attachments

filed in support of Plaintiff’s motion. The facts are assumed to be true for the purposes of this

motion. See Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (in light of defendant’s default,

a court is required to accept all of plaintiff’s factual allegations as true and draw all reasonable

inferences in plaintiff’s favor); see also BASF Corp. v. Original Fender Mender, Inc., No. 23-CV-

2796 (HG) (JAM), 2023 WL 8853704 (E.D.N.Y. Dec. 22, 2023), report and recommendation

adopted, Text Order (E.D.N.Y. Jan. 9, 2024) (same); Doe v. Hyassat, No. 18-CV-6110 (PGG)

(OTW), 2024 WL 1955354 (S.D.N.Y. May 3, 2024) (same).

On or about November 3, 2006, Cunningham, a resident of New York, obtained a loan (the

“Loan”) from non-party Argent Mortgage Company, LLC in the amount of $84,000.00, which was

memorialized by a note (the “Note”) and secured by a Mortgage (the “Mortgage”) encumbering

the Property. See Dkt. No. 1 ¶¶ 12, 13. The Mortgage was recorded on November 21, 2006 in the

Office of the City Register of the City of New York File Number (“CFRN”) 2006000645183. Id.

¶ 13; see Dkt. No. 1-3 at 2.2 Plaintiff subsequently obtained the Mortgage through a series of

1 Heqing Wang, a summer intern who is a second-year law student at the Elisabeth Haub School of Law at

Pace University, is gratefully acknowledged for her assistance in the research and drafting of this report

and recommendation.

2 Page citations are to the ECF-stamped pages.

assignments and is the holder of the Note, which was endorsed in blank. Dkt. No. 1 ¶¶ 14-16; see

also Dkt. Nos. 1-2, 1-4.

On April 1, 2007, Cunningham allegedly defaulted under the terms of the Note and

Mortgage by failing to pay the monthly payment due. Dkt. No. 1 ¶ 20. According to Plaintiff, the

unpaid principal balance of the Loan is $83,932.59. Id. ¶ 24.

On February 22, 2022, Cunningham sold the Property to its current owner, Queens Capital

pursuant to a Deed recorded in the City Register of the City of New York on April 12, 2022 as

CRFN 2022000153092. Id. ¶ 17; see also Dkt. No. 1-5.

On March 19, 2021, Plaintiff mailed a “statutory 90 Day Notice” pursuant to New York

Real Property Actions and Proceedings Law (“RPAPL”) § 1304 to Cunningham advising of

possible legal action if the default under the Note and Mortgage together was not cured. See Dkt.

No. 1 ¶ 21.

According to Plaintiff, “[n]o other action or proceeding has been commenced or maintained

or is now pending at law or otherwise for the foreclosure of said Mortgage, or to recover the

amount due under the Note.” Id. ¶ 27.

B. Procedural History

On January 2, 2024, Plaintiff filed the complaint in this action, seeking to foreclose on the

Property pursuant to RPAPL § 1301 et seq. See generally Dkt. No. 1. The complaint names six

defendants: (1) Cunningham, as the obligor under the terms of the Note; (2) Queens Capital, as the

record owner of the Property; (3) Con Edison, as a judgment creditor pursuant to a judgment

recorded against the Property on November 30, 2016; (4) ECB, as a “judgment creditor on the

Property of multiple violation liens”; (5) DOF, as “the possible holder of a tax lien against the

Property”; and (6) “John Doe” and “Jane Doe,” as “tenants, occupants, persons, or corporation, if

any, having or claiming an interest in or lien upon the Property.” Id. ¶¶ 3-8. Plaintiff alleges that

Defaulting Defendants each “ have some interest in or lien upon” the Property that is subordinate

to the Mortgage. Id. ¶ 9.

On January 23, 2024, Plaintiff served ECB and DOF with the summons and complaint at

the Office of the Corporation Counsel, New York City Law Department. Dkt. Nos. 12, 13.

On January 25, 2024, Plaintiff served Con Edison with the summons and complaint at its

principal place of business located at 4 Irving Place, New York, New York 10003. Dkt. No. 18.

On the same day, Plaintiff served John Doe and Jane Doe with the summons and complaint via

personal service at the Property by purportedly leaving a copy with “Rashida ‘Doe’ (Refused Full

Name).” Dkt. No. 15.

On January 24, 2024, Con Edison filed a notice of appearance wherein it states that it

“waives service of all papers and of notices of all proceedings in said action except the notice of

sale and notice of proceeding to obtain surplus moneys.” Dkt. No. 9 at 1. On February 16, 2024,

Cunningham and Queens Capital filed answers to the complaint. See Dkt. Nos. 24, 26. None of

the Defaulting Defendants, including Con Edison, have filed an answer or otherwise responded to

the complaint.

On February 21, 2024, upon learning the first name of the tenant residing at the Property,

Plaintiff filed a motion to substitute defendant “John Doe” and “Jane Doe” for Rashida “Doe.”

See Dkt. No. 30 at 1. On February 23, 2024, the Court issued an order granting the motion. See

Feb. 23, 2024 Dkt. Order.

On February 26, 2024, Plaintiff requested a certificate of default against Con Edison, ECB,

DOF, and Rashida “Doe” for “failure to plead or otherwise defend.” Dkt. No. 31 at 1. On March

5, 2024, the Clerk of Court issued certificates of default against Con Edison, ECB, and DOF. Dkt.

No. 33. The Clerk of Court denied Plaintiff’s request for a certificate of default against Rashida

“Doe” because they had “not been identified by first and last name.” Id.

On March 12, 2024, the Court held an initial conference in which Plaintiff, Queens Capital,

and Cunningham appeared. See Mar. 12, 2024 Minute Entry. Con Edison failed to appear despite

their counsel having filed notices of appearance in the case. See id.; Dkt. Nos. 9, 19. As a result,

the Court ordered Con Edison to show cause why sanctions should not be issued for its non-

appearance. See Mar. 12, 2024 Minute Entry.

On March 15, 2024, Con Edison filed its response to the order to show cause, wherein it

stated:

a lienholder’s filing of a notice of appearance and waiver is a

common method to appear in a foreclosure action where the

lienholder takes no position regarding the underlying foreclosure

action. . . . Lienholder defendants in foreclosure actions are unlikely

to recover on their liens because after the foreclosure sale, there are

rarely surplus monies with which to satisfy those liens. . . . Thus, the

filing of such limited appearances affords lienholders a method by

which to protect their client’s interests at limited expense, while not

impeding the prosecution of the foreclosure action.

Dkt. No. 35 at 3-4. Based on this response, the Court issued an order indicating that it would not

sanction Con Edison; the Court, however, ordered counsel for Con Edison to appear at all future

conferences. See Mar. 15, 2024 Dkt. Order.

On March 27, 2024, Plaintiff filed a second motion to substitute Defendant Rashida “Doe”

with “Marcia Graham.” Dkt. No. 36. Plaintiff claimed that it had hired a private investigator to

verify the full identity of Rashida “Doe,” and based upon that investigation, it had “a high degree

of certainty that the woman” who was served with the summons and complaint on January 23,

2024 was “a woman named Marcia Graham” who resided at the Property. Id; see also Dkt. No.

36-1. On March 27, 2024, the Court issued an order granting the motion and directed the Clerk of

Court to “substitute Marcia Graham in place of ‘Rashida Doe’ on the docket and to amend the

docket accordingly.” Mar. 27, 2024 Dkt. Order.

On April 1, 2024, Plaintiff filed a second request for certificate of default against Graham

based on her “failure to plead or otherwise defend” in this action. Dkt. No. 39. On April 12, 2024,

the Clerk of Court issued a certificate of default against Graham. Dkt. No. 41.

On March 15, 2024, Plaintiff filed the current motion, which seeks a default judgment of

foreclosure against Defaulting Defendants. Dkt. No. 43. In support of this motion, Plaintiff

submits: (1) a notice of motion (Dkt. No. 43); (2) a memorandum of law (Dkt. No. 43-1); (2) a

declaration from Plaintiff’s counsel, Shauna DeLuca, Esq. (Dkt. No. 43-2), with exhibits including

the complaint (Dkt. No. 43-3), certificates of default (Dkt. No. 43-5), and a report from the

Department of Defense regarding Graham’s military status (Dkt. No. 43-9); (3) the affidavit of

Shawn Muneio, a managing partner of Plaintiff, with exhibits (Dkt. Nos. 43-10—43-16); (4) the

affidavit of Augustina Abeyta, an authorized signatory of Statebridge Company, LLC working as

an attorney-in-fact for Plaintiff, with exhibits (Dkt. Nos. 43-17 - 43-25); and (5) a proposed order

of default judgment (Dkt. No. 43-26). Plaintiff also filed a certificate of service indicating that

Plaintiff mailed a copy of the motion for default judgment to Graham at the Property and to Con

Edison, DOF, and ECB at their last known business addresses. See Dkt. No. 44.

II. Legal Standard for Default Judgment

“Rule 55 of the Federal Rules of Civil Procedure provides a two-step process for obtaining

a default judgment.” Priestley v. Headminder, Inc., 647 F.3d 497, 504 (2d Cir. 2011). At the first

step, the Clerk of Court enters a party’s default after an affidavit or other evidence shows that the

“party against whom a judgment for affirmative relief is sought has failed to plead or otherwise

defend.” Fed. R. Civ. P. 55(a); see Esquivel v. Lima Rest. Corp., No. 20-CV-2914 (ENV) (MMH),

2023 WL 6338666, at *3 (E.D.N.Y. Sept. 29, 2023) (“when a party uses an affidavit or other proof

to show that a party has ‘failed to plead or otherwise defend’ against an action, the clerk shall enter

a default.” (citing Fed. R. Civ. P. 55(a)). “If a claim is for ‘a sum certain or a sum that can be

made certain by computation,’ the clerk can enter judgment.” Esquivel, 2023 WL 6338666, at *3

(citing Fed. R. Civ. P. 55(b)(1)).

At the second step, and “[i]n all other cases, the party must apply to the court for a default

judgment.” Id. (citing Fed. R. Civ. P. 55(b)(2)). To “enter or effectuate judgment” the Court is

empowered to: “(A) conduct an accounting; (B) determine the amount of damages; (C) establish

the truth of any allegation by evidence; or (D) investigate any other matter.” Fed. R. Civ. P.

55(b)(2).

The Second Circuit “generally disfavor[s]” default judgment and has repeatedly expressed

a “preference for resolving disputes on the merits.” Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96

(2d Cir. 1993). Nevertheless, in evaluating a motion for default judgment, a court accepts as true

the plaintiff’s well-pleaded factual allegations, except those relating to damages. Greyhound

Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); see also Flaks v.

Koegel, 504 F.2d 702, 707 (2d Cir. 1974). The plaintiff bears the burden of alleging “specific

facts,” rather than “mere labels and conclusions” or a “formulaic recitation of the elements,” so

that a court may infer a defendant’s liability. Cardoza v. Mango King Farmers Mkt. Corp., No.

14-CV-3314 (SJ) (RER), 2015 WL 5561033, at *3 (E.D.N.Y. Sept. 1, 2015) (citing Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009)), report and recommendation adopted, 2015 WL 5561180

(E.D.N.Y. Sept. 21, 2015)).

The decision to grant or deny a default motion is “left to the sound discretion of a district

court.” Esquivel, 2023 WL 6338666, at *3 (quoting Shah v. New York State Dep’t of Civ. Serv.,

168 F.3d 610, 615 (2d Cir. 1999)). A court “possesses significant discretion” in granting a motion

for default judgment, “including [determining] whether the grounds for default are clearly

established.” Chen v. Oceanica Chinese Rest., Inc., No. 13-CV-4623 (NGG) (PK), 2023 WL

2583856, at *7 (E.D.N.Y. Mar. 21, 2023) (quotations and citation omitted). The Court may also

“consider numerous factors, including whether plaintiff has been substantially prejudiced by the

delay involved and whether the grounds for default are clearly established or in doubt.” Franco v.

Ideal Mortg. Bankers, Ltd., No. 07-CV-3956 (JS) (AKT), 2010 WL 3780972, at *2 (E.D.N.Y.

Aug. 23, 2010) (cleaned up), report and recommendation adopted, 2010 WL 3780984 (E.D.N.Y.

Sept. 17, 2010).

III. Jurisdiction and Venue

The Court “must satisfy itself that it has subject matter and personal jurisdiction before

rendering judgment against defendants.” Dumolo v. Dumolo, No. 17-CV-7294 (KAM) (CLP),

2019 WL 1367751, at *4 (E.D.N.Y. Mar. 26, 2019); see Covington Indus., Inc. v. Resintex A.G.,

629 F.2d 730, 732 (2d Cir. 1980) (“A judgment entered against parties not subject to the personal

jurisdiction of the rendering court is a nullity.”).

A. Subject Matter Jurisdiction

The Court has original jurisdiction over Plaintiff’s claims pursuant to 28 U.S.C. § 1332

because Plaintiff is a citizen of the State of Florida as both of its members are domiciled in Florida,

each Defendant is a citizen of the State of New York, and the amount in controversy exceeds

$75,000.00. See 28 U.S.C. § 1332; see also Dkt. No. 1 ¶¶ 2-7, 10; Dkt. Nos. 20, 36-1; Feb. 13,

2024 Dkt. Order.

B. Personal Jurisdiction

“A court may not enter default judgment unless it has jurisdiction over the person of the

party against whom the judgment is sought, which also means that he must have been effectively

served with process.” BASF Corp., 2023 WL 8853704, at *5 (internal quotations and citation

omitted).

Here, the Court has personal jurisdiction over ECB, DOF, and Con Edison. Plaintiff

properly served ECB and DOF with the summons and complaint by delivering copies to the Office

of the Corporation Counsel.3 Dkt. Nos. 12-13; see also Fed. R. Civ. P. 4(j)(2)(A)–(B); CPLR §

311(a)(2). Con Edison appeared in this action through counsel and did not contest service of

process or personal jurisdiction. Dkt. No. 9. Con Edison has therefore waived these defenses and

cannot later challenge a default judgment entered by this Court on service of process or personal

jurisdiction grounds. See Mickalis Pawn Shop, LLC, 645 F.3d at 119 (holding that “defendants

forfeited the defense of lack of personal jurisdiction and any other defenses they may have had by

willfully abandoning their defense of the litigation.”); see also Copulsky v. Boruchow, 545 F. Supp.

126 (E.D.N.Y. 1982) (holding that defendant waived personal jursidiction defense by failing to

raise it in his answer).

Plaintiff purports to have properly served “John Doe” and “Jane Doe” by leaving copies

with a woman named “Rashida Doe,” who Plaintiff later claimed is, in fact, Defendant Graham.

See Dkt. Nos. 15, 38. As explained in Section VI(B) infra, however, a default judgment against

3 ECB and DOF are New York City agencies and non-suable governmental entities. See NYC Charter §

396 (“All actions . . . shall be brought in the name of the city of New York and not in that of any agency[.]”).

Thus, when an action is brought against ECB or DOF, the Court construes the action as one against the City

of New York. Miss Jones, LLC v. Viera, No. 18-CV-1398 (NGG) (SJB), 2018 WL 11467906, at *1

(E.D.N.Y. Dec. 7, 2018); Thompson v. Grey, No. 08-CV-4499 (JBW), 2009 WL 2707397, at *5 (E.D.N.Y.

Aug. 26, 2009), aff’d, 385 F. App’x 54 (2d Cir. 2010); Alleva v. New York City Dep’t of Investigation, 696

F. Supp. 2d 273, 276 n.2 (E.D.N.Y. 2010), aff’d, 413 F. App’x 361 (2d Cir. 2011).

Graham is improper at this time because Plaintiff never served Graham with a copy of the

complaint that specifically identifies her as a defendant.

C. Venue

“[A] civil action may be brought in a judicial district in which any defendant resides, if all

defendants are residents of the State in which the district is located.” 28 U.S.C. § 1391(b)(1).

Here, all Defendants reside in New York (Dkt. No. 1 ¶¶ 3-8), and venue is therefore proper in this

district.4

IV. Procedural Compliance with Local Civil Rules 7.1 and 55.25

“A motion for default judgment will not be granted unless the party making the motion

adheres to all of the applicable procedural rules.” Annuity, Welfare & Apprenticeship Skill

Improvement & Safety Funds of Int’l Union of Operating Engineers, Loc. 15, 15A, 15C & 15D,

AFL-CIO v. Allstate Mapping & Layout, LLC, No. 22-CV-1831 (PKC) (TAM), 2023 WL

1475389, at *1 (E.D.N.Y. Feb. 2, 2023) (quoting Century Surety Company v. Adweek, No. 16-CV-

335 (ENV) (PK), 2018 WL 10466835, at *1 (E.D.N.Y. Jan. 9, 2018)). “[L]ocal rules have the

force of law, as long as they do not conflict with a rule prescribed by the Supreme Court, Congress,

or the Constitution.” See Fin. Servs. Vehicle Tr. v. Osmeña, No. 22-CV-7491 (RPK) (CLP), 2023

WL 7000935, at *2 (E.D.N.Y. Aug. 15, 2023) (citations and quotation marks omitted).

4 A corporation is deemed to be a resident of “any district” in “a state which has more than one judicial

district and in which . . . [that] corporation is subject to personal jurisdiction at the time an action is

commenced.” Id. § 1391(d). For venue purposes, the City of New York “resides” in both the Eastern

District and Southern District of New York. Savarese v. City of New York, No. 18-CV-5956 (ER), 2019

WL 2482387, at *4 (S.D.N.Y. June 13, 2019).

5 The Local Rules of the United States District Court for the Southern and Eastern Districts of New York

were updated on July 1, 2024. As set forth in Local Rule 1.1, “[t]hese Local Civil Rules take effect on July

1, 2024 [] and govern actions pending or filed on or after that date. For actions pending on the Effective

Date, if fewer than 14 days remain to perform an action governed by these Rules, the provisions of the

previous Local Rules effective on June 30, 2024 will govern.” Thus, the previous Local Rules remain

applicable here.

Under Local Civil Rule 7.1, a motion for default judgment must consist of a notice of

motion, a memorandum of law, and supporting affidavits and exhibits containing any factual

information and portions of the record necessary for the decision of the motion. Loc. Civ. R. 7.1(a).

Under Local Civil Rule 55.2, a “party seeking a judgment by default . . . shall append to the

application (1) the Clerk’s certificate of default, (2) a copy of the claim to which no response has

been made, and (3) a proposed form of default judgment,” and must mail these three items to the

“last known business address” of the defaulting party (if not an individual). Loc. Civ. R. 55.2(b)-

(c).

Here, Plaintiff has complied with Local Civil Rules 7.1 and 55.2(b). Plaintiff’s motion

includes a notice of motion (Dkt. No. 43), a memorandum of law (Dkt. No. 43-1), and affidavits

from Plaintiff in accordance with Local Civil Rule 7.1 (Dkt. Nos. 43-10, 43-17). Plaintiff also

attached the complaint, certificates of default, and a proposed form of default judgment to its

motion in accordance with Local Civil Rule 55.2(b). See Dkt. Nos. 43-3; 43-5; 43-26.

Plaintiff has also complied with Local Civil Rule 55.2(c). According to the certificate of

service, Plaintiff mailed a copy of the motion for default judgment to Con Edison, ECB, and DOF

at their last known business addresses. Dkt. No. 44. Plaintiff also mailed a copy to Graham at the

Property, which Plaintiff claims is her last known residential address based on its investigation

into her residential history and having served Graham at the Property. See id.; see also Dkt. No.

36-1 ¶¶ 6, 8; id. at 11-16; Dkt. No. 15.

Accordingly, Plaintiff has complied with Local Civil Rules 7.1 and 55.2

V. Compliance with the Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act (“SCRA”) requires a plaintiff seeking default

judgment to “file with the court an affidavit stating whether or not the defendant is in military

service and showing necessary facts to support the affidavit.” 50 U.S.C. § 3931; see also

Windward Bora, LLC v. Ortiz, No. 21-CV-04154 (MKB) (JMW), 2022 WL 3648622, at *5

(E.D.N.Y. July 5, 2022), report and recommendation adopted, 2022 WL 3647586 (E.D.N.Y. Aug.

24, 2022). “The non-military affidavit must be based not only on an investigation conducted after

the commencement of an action or proceeding but also after a default in appearance by the party

against whom the default judgment is to be entered.” Apex Mar. Co. v. Furniture, Inc., No. 11-

CV-5365 (ENV) (RER), 2012 WL 1901266, at *1 (E.D.N.Y. May 18, 2012). “The court lacks the

power to excuse compliance with th[is] statute.” Uribe v. Nieves, No. 17-CV-5155 (RRM) (RER),

2018 WL 4861377, at *1 (E.D.N.Y. Sept. 26, 2018).

Here, Plaintiff submits an affirmation from Plaintiff’s counsel that attaches a report from

Sam Yousefzadeh, Director of the Manpower Data Center at the Department of Defense, indicating

that Graham was not on active duty at the time of default. See Dkt. No. 43-9. This is sufficient to

establish compliance with 50 U.S.C. § 3931. See Morales v. Los Cafetales Rest. Corp., No. 21-

CV-1868 (AMD) (RER), 2023 WL 375647, at *5 n.3 (E.D.N.Y. Jan. 3, 2023), report and

recommendation adopted, 2023 WL 375642 (E.D.N.Y. Jan. 24, 2023).

VI. Discussion

Plaintiff seeks a default judgment against Defaulting Defendants – all of whom are non-

mortgagors alleged to hold some interest in or lien on the Property subordinate to the Mortgage.

See Dkt. No. 1 ¶¶ 5-9.

RPAPL § 1311 provides that “[e]very person having any lien or incumbrance upon the real

property which is claimed to be subject and subordinate to the lien of the plaintiff” shall be joined

as a necessary party to a foreclosure action. RPAPL § 1311(3). “This rule “derives from the

underlying objective of foreclosure actions—to extinguish the rights of redemption of all those

who have a subordinate interest in the property and to vest complete title in the purchaser at the

judicial sale.” Bank of Am., N.A. v. 3301 Atl., LLC, No. 10-CV-5204 (FB) (SMG), 2012 WL

2529196, at *14 (E.D.N.Y. June 29, 2012) (quoting N.C. Venture I, L.P. v. Complete Analysis,

Inc., 22 A.D.3d 540, 542-43 (2d Dep’t 2005)).

Entry of “[d]efault judgment against non-mortgagor defendants is generally appropriate

where the complaint alleges ‘nominal liability,’ meaning that ‘any judgments or liens a defendant

may have against the property are subordinate to the plaintiff’s lien.’” Windward Bora LLC v.

Baez, No. 19-CV-5698 (PKC) (SMG), 2020 WL 4261130, at *3 (E.D.N.Y. July 24, 2020)

(citations omitted). “When a default judgment is entered against a defendant with a ‘nominal

interest’ in a property, any such interest in the relevant property is terminated.” Id. (internal

quotations and citation omitted). But “[w]here a necessary party is not joined, that ‘party’s rights

are unaffected by the judgment of foreclosure and sale.’” 3301 Atl., LLC, 2012 WL 2529196, at

*14 (quoting In re Oligbo, 328 B.R. 619, 640 (Bankr. E.D.N.Y. 2005)).

A. DOF, ECB, and Con Edison

Plaintiff named DOF, ECB, and Con Edison as nominal defendants in the complaint based

on their “interest in or lien upon said mortgaged premises or some part thereof, which interest or

lien, if any, has accrued subsequent to, and is subject and subordinate to, the lien of said Mortgage.”

Dkt. No. 1 ¶ 9. Plaintiff does not seek monetary relief from these defendants (Dkt. No. 43-1 at 1)

(“Plaintiff does not seek a monetary judgment against the aforementioned defaulting parties.”).

Rather, they are named as defendants because their subordinate interests make them necessary

parties to a foreclosure action under New York law. See RPAPL § 1311(3); Wells Fargo Bank,

N.A. v. Watts, No. 16-CV-6919 (ENV) (RER), 2019 WL 3716190, at *1 (E.D.N.Y. Jan. 3, 2019),

report and recommendation adopted, 2019 WL 3714582 (E.D.N.Y. Mar. 13, 2019). Plaintiff seeks

a default judgment against DOF, ECB, and Con Edison based on their failure to respond to the

complaint despite proper service of process.6 See Dkt. Nos. 12, 13, 18.

With respect to municipal defendants ECB and DOF, courts apply a heightened pleading

standard to determine whether the plaintiff has established nominal liability. Windward Bora, LLC

v. Thompson, No. 18-CV-1811 (NGG) (RML), 2020 WL 1242828, at *5 (E.D.N.Y. Mar. 16, 2020)

(citations omitted) (explaining that courts apply a heightened pleading standard where a state or

city agency is named as a defendant). “The complaint must allege ‘detailed facts showing the

particular nature of the interest in or lien on the real property and the reason for making the state

or city agency a party-defendant.’” Id. (alterations omitted) (quoting RPAPL §§ 202(1), 202-a(1)).

“If the lien exists ‘by virtue of a judgment,’ and the defendant is a state agency, the complaint must

include ‘the name of the court, date recorded, clerk’s office in which filed, and names of the parties

against whom and in whose favor the judgment was recorded.’” Id. (alteration omitted) (quoting

RPAPL § 202(2)). “If the defendant is a city agency, the complaint must include that same

information, as well as ‘a brief description of the grounds for or the nature of such judgment.’” Id.

(quoting RPAPL § 202-a(2)). In addition, the plaintiff must substantiate their allegations with

documentation, such as a title report. See, e.g., Baez, 2020 WL 4261130, at *4 (collecting cases).

“For a suit against non-government creditors, more lenient pleading standards apply.”

ARCPE Holding, LLC v. 9Q4U5E LLC, No. 19-CV-6417 (DLI) (RER), 2021 WL 8316275, at *4

6 While Con Edison entered an appearance in this case and “waive[d] service of all papers and of notices

of all proceedings in said action except the notice of sale and notice of proceeding to obtain surplus moneys,”

Con Edison’s failure to respond to the complaint warrants the entry of default judgment. See E. Sav. Bank,

FSB v. Whyte, No. 13-CV-6111 (CBA) (LB), 2015 WL 790036, at *5 (E.D.N.Y. Feb. 24, 2015)

(recommending default judgment against Con Edison in foreclosure action despite Con Edison’s notice of

appearance and waiver of service); Fed. Home Loan Mortg. Corp. v. Ambassador Assocs., L.P., No. 05-

CV-6546 (MAT), 2006 WL 2873641, at *4 (W.D.N.Y. Oct. 6, 2006) (entering default judgment against

entities that appeared in foreclosure case and entered waivers but failed to answer or move against the

complaint).

(E.D.N.Y. Aug. 11, 2021) (citation omitted). “A well-pleaded complaint is sufficient to ascribe

liability to non-government defendants even without elaborating on the nature of their interest in

the property.” Id. (citation omitted).

Here, Plaintiff alleges that DOF “is “a necessary party to this action because it is the

possible holder of a tax lien against the Property.” Dkt. No. 1 ¶ 7. This conclusory allegation is

insufficient to meet RPAPL’s heightened pleading standard. See SAC Fund II 0826, LLC v.

Burnell’s Enterprises, Inc., No. 18-CV-3504 (ENV) (PK), 2019 WL 5694078, at *7 (E.D.N.Y.

Sept. 7, 2019) (“Plaintiff does not allege more than ‘bare allegations’ of the DOF’s interest and

thus did not reach the heightened pleading standard that is required for this Defendant.”), report

and recommendation adopted, 2019 WL 5956526 (E.D.N.Y. Nov. 13, 2019); Miss Jones, LLC v.

Brahmadutta Bisram, Y & S Dev. of NY, Inc., No. 16-CV-7020 (NGG) (SMG), 2018 WL 2074200,

at *4 (E.D.N.Y. Feb. 5, 2018), report and recommendation adopted, 2018 WL 2074205 (E.D.N.Y.

Feb. 22, 2018) (denying motion for default judgment against DOF because plaintiff failed to meet

the heightened pleading requirements of RPAPL § 202-a); CIT Bank, N.A. v. Paganos, No. 14-

CV-3987 (CBA) (VMS), 2015 WL 13731361, at *6 (E.D.N.Y. Sept. 25, 2015), report and

recommendation adopted, 2016 WL 3945343 (E.D.N.Y. July 19, 2016) (“Plaintiff’s pleadings as

to the Department of Finance are not similarly sufficient.”).

Plaintiff, however, sufficiently alleges the nominal liability of ECB and Con Edison. As

for ECB, Plaintiff alleges that “it is a judgement creditor on the Property of multiple violation

liens.” Dkt. No. 1 ¶ 6. The complaint references an Exhibit G, which lists twelve sanitation

violations recorded against the Property and includes the dates of the violations, the penalty

amounts, and their current status. Id.; see Dkt. No. 1-7. This is sufficient to establish ECB’s

nominal liability. See Courchevel 1850 LLC v. Pinto-Bedoya, No. 16-CV-6716 (NGG), 2017 WL

5157451, at *1 (E.D.N.Y. Nov. 7, 2017) (holding that plaintiff’s “30-page list of citations” issued

by ECB was sufficient to establish nominal liability); Cit Bank v. Dambra, No. 14-CV-3951 (SLT)

(VMS), 2015 WL 7422348, at *6 (E.D.N.Y. Sept. 25, 2015) (finding list of citations sufficient to

establish ECB’s nominal liability), report and recommendation, 2015 WL 7430006 (E.D.N.Y.

Nov. 20, 2015).

As for Con Edison, Plaintiff alleges that Con Edison is a judgment creditor pursuant to a

Queens County Supreme Court judgment against the Property, docketed November 30, 2016 in

the amount of $42,338.47. See Dkt. No. 1 ¶ 5; see also Dkt. No. 1-6. This too is sufficient to

establish Con Edison’s nominal liability. See Whyte, 2015 WL 790036, at *3 (finding well-pleaded

allegations of nominal liability against Con Edison based on a state court judgment it held against

the mortgagor).

Notwithstanding Plaintiff’s well-pleaded allegations against ECB and Con Edison, it

would be premature at this juncture for the Court to enter a default judgment against these

Defendants (or, for that matter, against DOF) because their rights and obligations are implicated

only in the event of a foreclosure judgment against Queens Capital, the current owner of the

Property. See Watts, 2019 WL 3716190, at *1 (holding that default judgment was premature

against junior lienholders prior to entry of a foreclosure judgment against property owner).

The Watts case is instructive. There, the plaintiff alleged that municipal defendants—the

Criminal Court of the City of New York, the New York City Environmental Control Board, and

the New York City Transit Adjudication Bureau—claimed “an interest or lien encumbering the

property, which is either subordinate to Plaintiff's Mortgage, or paid in full, equitably subordinated,

or adverse to Plaintiff’s Mortgage.” Id. at *1 (citation omitted). The plaintiff did not seek

“monetary relief from these defendants []; rather, they [were] included because their subordinate

interests make them necessary parties to a foreclosure action under New York law. N.Y. Real Prop.

Acts Law § 1311(3).” Id. As the court noted in Watts, “[t]his provision facilitates foreclosure by

ensuring that the purchaser at the judicial sale make take free and clear title.” Id. (citing 3301 Atl.,

LLC, 2012 WL 2529196, at *14). The court added that “[w]ere junior lienholders not joined, their

rights of redemption would not be extinguished”; therefore, the municipal defendants’ “rights and

obligations are implicated only in the event of a foreclosure judgment against” the property owner,

defendant Watts. Id. The court concluded that “[b]ecause Mr. Watts has appeared to defend the

suit, to issue a default judgment against the [m]unicipal [d]efendants at this juncture would be

premature.” Id.

Like Watts, Queens Capital and Cunningham have appeared in this case and are contesting

liability. See Dkt. Nos. 24, 26. Thus, it would be premature for the Court to enter a default

judgment against Con Edison and ECB (and, should liability be established, against DOF) at this

time. See Watts, 2019 WL 3716190, at *1; see also Windward Bora LLC v. Montour, No. 23-

CV-3654 (EK) (LGD), 2024 WL 1142389, at *1 (E.D.N.Y. Mar. 15, 2024) (denying second

default judgment motion as premature because it was filed before the damage issues in the first

default judgment motion on foreclosure and sale were resolved); Empire Cmty. Dev. LLC v.

Campoverde, No. 22-CV-4046 (RPK) (VMS), 2023 WL 7000878, at *7 (E.D.N.Y. Aug. 23, 2023)

(“Here, as the motion for default judgment as to [the principal defendant] should be denied, [the

principal defendant’s] liability is not yet established. Because extinguishing [the defendant-

lienholder’s] interest would be premature at this time, the Court respectfully recommends that the

motion for default judgment with respect to [the defendant-lienholder’s] be denied without

prejudice.”).

As in Watts, the Court notes that default judgment against Defaulting Defendants may still

be appropriate at a later stage, as “[c]ourts in this district have found that entry of default judgment

pursuant to Federal Rule of Civil Procedure 55 is appropriate where the complaint alleges ‘nominal

liability—i.e., that any judgments the Defaulting Defendants may have against [the debtor], if liens

on the mortgaged property, are subordinate to the [plaintiff’s] lien.’” Watts, 2019 WL 3716190,

at *1 (collecting cases).

Accordingly, this Court respectfully recommends that Plaintiff be permitted to renew its

motion for default judgment against ECB and Con Edison when it seeks a determination of liability

against Queens Capital and Cunningham. This Court further respectfully recommends that

Plaintiff be permitted to amend the complaint to include sufficient allegations of DOF’s alleged

nominal liability.

B. Graham

Plaintiff also seeks a default judgment against Graham, a purported tenant of the Property.

See Dkt. No. 36 at 1. Plaintiff’s request should be denied because Plaintiff has not established that

Graham is in default, and the complaint does not plausibly allege Graham’s nominal liability as a

tenant.

Graham became a party to this litigation only with the issuance of the Court’s March 27,

2024 order granting Plaintiff’s motion to substitute, which amended the caption to replace

“Rashida Doe” with Graham. See Mar. 27, 2024 Dkt. Order. Plaintiff did not subsequently move

to amend the complaint, nor did Plaintiff serve Graham with a copy of the complaint that includes

her name in the caption. See Dkt. No. 43-3. “Thus, until now, [Graham has] had no obligation to

respond to the [c]omplaint in any way.” Christiana Bank & Tr. Co. v. Dalton, No. 06-CV-3206

(JS) (ETB), 2009 WL 4016507, at *5 (E.D.N.Y. Nov. 17, 2009) (denying default judgment against

tenants, who were initially named as “John Doe” and “Jane Doe,” because plaintiff failed to amend

the complaint and serve them with a copy). As a result, Plaintiff has failed to establish that Graham

is in default for failing to respond to the complaint. Id.

But even if Graham was in default, the complaint still fails to sufficiently allege her

nominal interest in the Property. The complaint alleges that, “Defendants ‘JOHN DOE’ and

‘JANE DOE’ are additional parties being the tenants, occupants, persons, or corporation, if any,

having or claiming an interest in or lien upon the Property.” Dkt. No. 1 ¶ 8 (citing RPAPL §§

1311, 1312 and 1313). This allegation does not specifically describe the nature of Graham’s

interest in the Property—i.e., that of a tenant, as opposed to an “occupant, person[], or

corporation”—and is therefore insufficient to establish her nominal liability. See Onewest Bank

N.A. v. Louis, No. 15-CV-00597 (PAC) (BCM), 2016 WL 3552143, at *12 (S.D.N.Y. June 22,

2016) (recommending that default judgment be denied against doe defendants because complaint

did not specifically allege that they were tenants but instead stated that they were “occupants,

persons in possession, licensees, tenants, or others who may be in possession, claim to have a right

of possession in and to the [m]ortgaged [p]roperty”), report and recommendation adopted, 2016

WL 4059214 (S.D.N.Y. July 28, 2016); cf. E. Sav. Bank, FSB v. Robinson, No. 13-CV-7308 (ADS)

(SIL), 2016 WL 3365091, at *2 (E.D.N.Y. May 9, 2016) (recommending default judgment against

tenant where the complaint alleged that tenant’s “interest in the [s]ubject [p]roperty [was] limited

to her tenancy”), report and recommendation adopted, 2016 WL 3102021 (E.D.N.Y. June 2,

2016).

Accordingly, this Court respectfully recommends that Plaintiff’s motion for default

judgment against Graham be denied but that Plaintiff be permitted to amend the complaint to

sufficiently describe the nature of Graham’s interest in the Property.

VII. Conclusion

For the foregoing reasons, this Court respectfully recommends that Plaintiff’s motion for

default judgment be DENIED without prejudice. This Court further respectfully recommends that

Plaintiff be permitted to amend the complaint to plausibly allege DOF’s and Graham’s nominal

liability.

A copy of this Report and Recommendation is being electronically served on counsel.

Plaintiff’s counsel is directed to serve a copy of this Report and Recommendation on Defendants

by overnight mail and first-class mail and file proof of service on ECF by August 27, 2024.

Copies shall be served at the following addresses:

Consolidated Edison Co. of NY Inc.

4 Irving Place

New York, NY 10003

NYC Department of Finance

100 Church Street

New York, NY 10007

NYC Environmental Control Board

59-17 Junction Boulevard

Corona, NY 11368

Marcia Graham

14221 230th Place

Laurelton, NY 11413

Any objections to this Report and Recommendation must be filed within 14 days after

service of this Report and Recommendation. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(2).

See also Fed. R. Civ. P. 6(a) & (d) (addressing computation of days). Any requests for an extension

of time for filing objections must be directed to Judge Merle. Failure to file objections within this

period designating the particular issues to be reviewed waives the right to appeal the district court’s

order. See 28 U.S.C. § 636(b); Fed. R. Civ. P. 72(b)(2); Wagner & Wagner, LLP v. Atkinson,

Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010); Kotlyarsky

v. United States Dep’t of Just., No. 22-2750, 2023 WL 7648618 (2d Cir. Nov. 15, 2023); see also

Thomas v. Arn, 474 U.S. 140 (1985).

Dated: Brooklyn, New York

August 26, 2024 SO ORDERED.

/s/ Joseph A. Marutollo

JOSEPH A. MARUTOLLO

United States Magistrate Judge