The heirs formed an LLC and handed the bank a timing problem it couldn't fix
A seven-year delay cost HSBC part of its Brooklyn foreclosure case, after New York appeals court found the bank had moved too slowly against heir.
On September 2, 2026, the Appellate Division, Second Department, split its ruling in HSBC Bank USA, N.A. v Wharton. It upheld the dismissal of the bank's claim against one defaulting heir, then revived the case against everyone else.
The loan dates to February 2004, when the borrower and the borrower's spouse signed a note for $225,000 with Wells Fargo Home Mortgage, Inc., secured by a mortgage on a Brooklyn property. The spouse died first. The borrower died in April 2011.
In June 2015, HSBC brought a foreclosure action against the decedent's alleged heirs and distributees. One heir and another heir, drove what came next. The first heir was served in August 2015 and never answered.
That is where the bank's clock started running. Under New York's CPLR 3215(c), a plaintiff has one year after a defendant defaults to move for a default judgment. Miss that year without a good reason, and the court "shall dismiss the complaint as abandoned." The dismissal is mandatory, not discretionary.
HSBC never moved for a default judgment against the first heir inside that year. More than seven years passed between her default and the motion that ended the bank's claim. HSBC pinned the gap on the time it took to obtain letters of administration for the estate. The court rejected that as too thin to excuse a delay that long.
In May 2023, two heirs formed Property 1501, LLC, and the first heir transferred her interest in the property to the company. As her successor, Property 1501 could ask the court to clear the abandoned claim. It filed that motion in November 2023, and the trial court agreed.
On appeal, the Second Department affirmed. Property 1501 stood in first heir's place, the one-year window had closed, and the estate excuse did not save the bank.
Then the company reached too far. It had also won dismissal of the claims against the remaining defendants under CPLR 306-b, which requires serving the summons and complaint within 120 days. The appeals court reversed that part. None of those defendants had transferred an interest in the property to Property 1501, so the company had no standing to argue for them. Those claims live on.
For lenders and servicers, the lesson sits in the calendar. A default starts a one-year clock, and estate complications will not stop it on their own.
