Second Circuit Holds That Foreclosure Order That Defers Calculation of Judgment Is Not a Final Appealable Order

In RSS WFCM2018-C44 – NY LOD, LLC v. 1442 Lexington Operating DE LLC, No. 22-1 (2d Cir. Feb. 13, 2023), the Second Circuit holds in a matter of first impression for the circuit that a foreclosure order that also “refers the case to a magistrate judge to calculate the amount of the judgment of foreclosure and sale” is not “final” within the meaning of 28 U.S.C. § 1291 and thus not appealable.

Much of the federal judicial docket is devoted to diversity foreclosure actions essentially like this one. The plaintiff noteholder filed a federal complaint and moved for summary judgment. “[T]he district court issued an order and judgment (the ‘December 2, 2021 Order and Judgment’), which . . . stated that ‘[the Noteholder] is hereby granted final judgment as to the [Foreclosure Claims] of the Complaint’ and that ‘the calculation of the amount of the judgment of foreclosure and sale is hereby referred to’ a magistrate judge.” The defendant borrower filed a notice of appeal on December 29, 2021, before the magistrate judge had an opportunity to calculate a final judgment amount.

The Second Circuit dismisses the appeal. As a rule, “[o]nce a judgment of foreclosure and sale is entered, it is generally final” for purposes of 28 U.S.C. § 1291 “because all that remains to be done is executing the judgment to enforce the rights and obligations that have been adjudicated.” But here, the order was out of the norm because there was an “undecided question[] going to the merits of the dispute,” i.e., the “December 2, 2021 Order and Judgment explicitly leaves unresolved the question of the amount due upon the debt.”

“Because the remedy – i.e., the amount to be paid to the Noteholder from the future sale of the Property – has not yet been determined, the judgment is not yet final within the meaning of section 1291.” The panel further holds that the calculation was not purely “ministerial,” as might otherwise justify retaining appellate jurisdiction. “The calculation of ‘the amount due and owing to [the Noteholder] on the [l]oan’ . . . will involve resolving underlying factual questions” that are in dispute, “such as the amount already paid on the loan to date.”

The panel also holds that no theory of interlocutory appeal supports jurisdiction. The order was not certified for appeal under Fed. R. Civ. P. 54(b) or 28 U.S.C. § 1292(b), nor did the collateral order doctrine apply because order on appeal was not separate from the merits. The order was not in the form of (or in practical effect) an injunction that would be subject to immediate appeal under 28 U.S.C. § 1292(a)(1).

Finally, the panel holds that it does not have jurisdiction under “the long[-]standing rule of Forgay v. Conrad, [47 U.S. (6 How.) 201, 204 (1848)] under which an order is treated as final if it directs the immediate delivery of property and subjects the losing party to irreparable harm if appellate review is delayed.” Here, “there is no order requiring that the Property be immediately sold; to the contrary, the Borrower conceded at oral argument that sale cannot occur before the magistrate judge calculates the amount due upon the debt.” The panel notes that “[i]n light of this conclusion, we need not decide whether the Supreme Court’s decision in Mohawk Industries, Inc. v. Carpenter, 558 U.S. 100 (2009), overruled the Forgay doctrine.”

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