Apex Bank faced a setback in its legal battle against Theresa D. Fasulo-Brancaleone and Peter Brancaleone when the Appellate Division of the Supreme Court of the State of New York ruled against the bank in a mortgage foreclosure case. The court's decision, issued on July 1, 2026, reversed a previous judgment that had awarded the defendants $57,357.70 in attorney's fees. This ruling could have significant implications for how attorney fees are awarded in similar foreclosure cases in the future.
The case, known as Apex Bank v. Fasulo-Brancaleone (Docket No. 2023-02870), originated from a dispute over a mortgage foreclosure initiated by Apex Bank. The bank sought to foreclose on a property owned by the defendants, Fasulo-Brancaleone and Brancaleone, who countered with a cross-motion for attorney's fees after successfully defending against the bank's claims. The initial ruling in favor of the defendants set a precedent that allowed for attorney fee recovery in such cases, but the recent appellate decision has altered that landscape.
Apex Bank and the defendants, Fasulo-Brancaleone and Brancaleone, were involved in a legal dispute over a mortgage on residential real property. The bank filed for foreclosure, claiming that the defendants failed to meet their obligations under the mortgage agreement. In response, the defendants filed a cross-motion seeking attorney's fees, arguing that they had successfully defended against the bank's claims. The Supreme Court of Nassau County initially sided with the defendants, granting their request for attorney's fees and resulting in a judgment in their favor.
The case reached the Appellate Division after Apex Bank appealed the judgment. The bank contended that the lower court erred in awarding attorney's fees to the defendants. The appellate judges reviewed the case, focusing on the legal standards for awarding attorney's fees in mortgage foreclosure actions.
The court ruled that the defendants were no longer considered prevailing parties in the context of Real Property Law § 282. The law states that a mortgagee may recover attorney's fees incurred due to the mortgagor's failure to perform any covenant in the mortgage. However, the court noted that since the defendants were not prevailing parties in the foreclosure action, they were not entitled to attorney's fees for their defense. The judges, including Angela G. Iannacci, Linda Christopher, Carl J. Landicino, and Phillip Hom, stated, "Since the defendants are no longer prevailing parties for the purpose of Real Property Law § 282, they are not entitled to an award of attorneys' fees for a 'successful defense' of this foreclosure action."
This ruling is significant as it clarifies the criteria under which attorney's fees can be awarded in mortgage foreclosure cases in New York. The court's decision effectively denies the defendants' request for attorney's fees, which could discourage similar claims in future foreclosure disputes. The judges emphasized that the defendants' prior status as prevailing parties was no longer applicable, thus changing the landscape for attorney fee recovery in such cases.
The impact of this ruling extends beyond the immediate parties involved. Homeowners facing foreclosure may find it more challenging to recover attorney's fees if they successfully defend against a bank's claims. This could lead to increased financial burdens for homeowners who must defend against foreclosure actions without the assurance of recovering legal costs. Additionally, banks may feel emboldened to pursue foreclosure actions, knowing that the potential for attorney fee recovery for defendants has diminished.
Furthermore, the ruling sets a precedent that could influence how courts interpret attorney fee provisions in mortgage agreements moving forward. Legal experts may need to reassess strategies for defending against foreclosure actions, particularly in light of the court's interpretation of prevailing party status under Real Property Law § 282.
Looking ahead, the possibility of an appeal remains. While the defendants could seek further review of the appellate court's decision, details were not available in the court filing regarding any plans for an appeal. There may also be related cases pending that could further clarify the application of attorney fee awards in mortgage foreclosure actions. The outcome of this case may serve as a reference point for future litigation involving similar legal questions.