NEW YORK, Jan 3 (Reuters) - A Brooklyn judge should not have tossed a foreclosure case just because the foreclosing bank's counsel--from the scandal-plagued Steven J. Baum P.C. law firm--missed a deadline for filing paperwork rebutting its alleged conflict of interest, a New York appeals court has ruled.

The unanimous, unsigned order from the Appellate Division, Second Department, restores the foreclosure action brought against Kelvy Guichardo by the trustee for his mortgage US Bank NA. The case had been dismissed sua sponte by Kings County Justice Arthur Schack in a Nov. 8, 2010 ruling.

Schack, who has developed a reputation for taking a tough stance against mistakes and missed deadlines in foreclosure cases, raised concerns several months after the case was filed about a potential conflict of interest for Baum attorneys involved in the case. According to the court record, the Baum firm was representing both US Bank, the plaintiff, and defendant Mortgage Electronic Registation Systems Inc., which had been assigned the mortgage at the center of the foreclosure action.

In a February 2, 2009, order, Schack directed the firm to submit an affirmation that it was not simultaneously representing both the plaintiff and MERS in the case. Schack's order gave the Baum firm 60 days to comply with the request.

It took roughly six months for the Baum firm to submit the required affirmation, according to the ruling. Citing the missed deadline, Schack ordered that the entire case be dismissed and the notice of pendency filed against the property in question be cancelled.

'NO PATTERN OF WILLFUL NONCOMPLIANCE'

But on appeal, the Second Department found that Schack had abused his authority in applying such a drastic remedy.

"[T]he Supreme Court was not presented with any extraordinary circumstances warranting dismissal of the complaint," the court wrote in a ruling released last week. "There was no pattern of willful noncompliance with court orders on the part of the plaintiff, and the Supreme Court gave no warning that the failure to submit the requested affirmation within 60 days of the Feb. 2, 2009, order would result in the dismissal of the complaint and cancellation of the notice of pendency."

The Baum firm, which is based in Amherst, a suburb of Buffalo, announced in November that it would wind down and eventually shutter its practice, after a string of bad news including federal and state investigations into its handling of cases, as well as decisions from government-backed mortgage giants Fannie Mae and Freddie Mac to bar loan servicers from referring new cases to Baum.

An attorney for US Bank, Allison Schoenthal of Hogan Lovells, said she was pleased that the appeals court had agreed with her client. Guichardo was apparently not represented in the appellate case.

The case is US Bank NA etc. v. Guichardo, in the Supreme Court of the State of New York, Appellate Division, Second Department, No. 2001-01628.

For the plaintiff: Allison Schoenthal, Renee Garcia and Jessica Ellsworth of Hogan Lovells.

(Reporting by Jessica Dye)

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