Opinion
Index No. 710424/2017
07-28-2023
FV-I. INC., IN TRUST FOR MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC, Plaintiff, v. LUIS E. PALAGUACHI; ROSA E. PALAGUACHI; NUBE LAPORTE; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR FIRST NATIONAL BANK OF ARIZONA; CRIMINAL COURT OF THE CITY OF NEW YORK; NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE; FIA CARD SERVICES; NEW YORK CITY ENVIRONMENTAL CONTROL BOARD: TRANSIT ADJUDICATION BUREAU; GUSTAVIA HOME LLC; Defendants.
Unpublished Opinion
Present: Honorable Joseph J. Esposito Justice.
JOSEPH J. ESPOSITO, J.S.C.
The following numbered papers read on this motion by defendant Gustavia Home, LLC (Gustavia) for renewal of plaintiff s motion for summary judgment and an order of reference.
Papers Numbered
Order to Show Cause - Affirmation - Exhibits..... EF 243-252
Answering Affirmation - Exhibit.................. EF 257-259
Reply Affirmation - Exhibit...................... EF 260-262
Upon the foregoing papers it is ordered that the motion is determined as follows:
In this mortgage foreclosure action, the court (Esposito, J.) granted plaintiffs motion for, among other things, summary judgment and appointment of a referee to compute the amount due in an order entered March 9, 2022. Citing Freedom Mtge. Corp, v Engel (37 N.Y.3d 1 [2021]), the court rejected the argument of Gustavia, the only defendant appearing in the action, that plaintiffs voluntary discontinuance of an earlier action did not effectively decelerate the loan to render the instant action time-barred. Gustavia now moves to renew' the order entered March 9, 2022, on the ground that a change in law would alter the prior determination (see CPLR 2221 [e][2]).
A party may appropriately seek relief from a prior order based on a change in the law by a motion to renew (see CPLR 2221[e][2]; Opalinski v City of New York. 205 A.D.3d 917. 919 [2d Dept 2022]; Dinallo v DAL Elec., 60 A.D.3d 620, 621 [2d Dept 2009]). Gustavia argues that the Foreclosure Abuse Prevention Act (L 2022, ch 821) (FAPA) amended various statutes, which would change the outcome of the March 9. 2022 order.
Gustavia relies on FAPA's amendments to the CPLR, which added subdivision [h] to CPLR 203 and subdivision |e] to CPLR 3217. Both amended statutes refer to CPLR 213[4], which requires commencement within six years of "an action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein." CPLR 203[h] provides that "[o]nce an action upon an instrument described in subdivision four of section two hundred thirteen of this article has accrued, no party may, in form or effect, unilaterally waive, postpone, cancel, toll, revive or reset the accrual thereof, or otherwise purport to effect a unilateral extension of the limitations period prescribed by law to commence an action and to interpose the claim, unless expressly prescribed by statute. CPLR 3217[e] provides that "fi]n any action on an instrument described under subdivision four of section two hundred thirteen of this chapter, the voluntary discontinuance of such action, whether on motion, order, stipulation or by notice, shall not. in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute". Gustavia maintains that these amended statutes apply retroactively and encompass the instant action because § 10 of FAPA provides that "[t]his act shall take effect immediately and shall apply to all actions commenced on an instrument described under subdivision four of section two hundred thirteen of the civil practice law and rules in which a final judgment of foreclosure and sale has not been enforced" (see HSBC Bank USA, N.A. v Francis, 214 A.D.3d 58. 64 n [2d Dept 2023]). Specifically. Gustavia argues that under CPLR 203[h] and 3217fe]. plaintiff's predecessor's foreclosure action commenced November 17, 2010, was not effectively decelerated by the notice of discontinuance on June 12, 2012, and renders plaintiffs action commenced July 28, 2017 time-barred.
In opposition, plaintiff argues that FAPA does not apply retroactively and would not affect plaintiffs action. Generally, statutory amendments have prospective effect unless its language indicates a contrary interpretation (see People v Galindo, 38 N.Y.3d 199. 207 [2022]; Matter of Gleason (Michael Vee, Ltd.), 96 N.Y.2d 117, 122 [2001]; Matter of Thomas v Bethlehem Steel Corp., 63 N.Y.2d 150, 154 [1984]). Plaintiff contends that § 10 of FAPA does not provide it is to be applied retroactively. Although plaintiff correctly argues that a provision that a statute is to take effect immediately, without more, is insufficient to establish it is to be applied retroactively (see Gottwald v Sebert, ___NY3d ___, 2023 NY Slip Op 03183 *7 [2023]; Majewski v Broadalbin-Perth Cent. School Dist., 91 N.Y.2d 577, 583-84 [1998]; Marrero v Crystal Nails, 114 A.D.3d 101. 113 [2d Dept 2013]), here, § 10 further provides that FAPA applies to all mortgage foreclosure actions "in which a final judgment of foreclosure and sale has not been enforced." This language evinced an intent for FAPA to reach all mortgage foreclosure actions in which the judgments had not been enforced irrespective of whether they were commenced before or after the date FAPA was enacted (see Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 35 N.Y.3d 332, 374 [2020]). Although plaintiff contends that an "even clearer expression of legislative intent" to retroactively apply statutes is required, that standard applies to statutes that revive time-barred claims (Matter of Regina Metro. Co.. LLC. 35 N.Y.3d at 371; see 35 Park Ave. Corp, v Campagna, 48 N.Y.2d 813, 815 [ 1979|). The converse situation is involved here as FAPA may extinguish actions as time-barred that had been viable due to judicial interpretation of the laws applicable to mortgage foreclosure actions. Therefore, heightened clarity of the Legislature's intent need not be found here. Given the Legislature's clear indication that FAPA is to be applied retroactively, plaintiffs reliance on cases holding that procedural statutes are to be applied prospectively absent a clear Legislative directive to the contrary is misplaced (see Simonson v International Bank, 14 N.Y.2d 281 [1964]; Wade v Byung Yang Kim. 250 A.D.2d 323, 325-326 [2d Dept 1998]; Auger v State of New York, 236 A.D.2d 177, 179-80 [3d Dept 1997]).
In addition, "[a]meliorative or remedial legislation . . . should be given retroactive effect in order to effectuate its beneficial purpose" (Matter of Marino S., 100 N.Y.2d 361,370-71 [2003]; Matter of Gleason (Michael Vee. Ltd.), 96 N.Y.2d at 122). In the legislative materials, the legislature found that "an ongoing problem with abuses of the judicial foreclosure process and lenders' attempts to manipulate statutes of limitation . . . exacerbated by recent court decisions which, contrary to the intent of the legislature, have given mortgage lenders and loan servicers opportunities to avoid strict compliance with remedial statutes and manipulate statutes of limitation to their advantage" (Assembly Mem in Support of 2022 Assembly Bill A7737 enacted as L 2022, ch 821). FAPA's purpose was "to clarify the meaning of existing statutes, and to rectify these erroneous judicial interpretations thereof' (Id.). To accomplish these objectives, FAPA amended "certain statutes and rules to clarify the existing law and overturn certain court decisions to ensure the laws of this state apply equally to all litigants, including those currently involved in mortgage foreclosure actions, in order to ensure that parties purporting to sue on mortgage debt are bound by the same statutes of limitations that bind all other litigants" (Id.). Thus, retroactive application of FAPA is further supported by its legislative history indicating its purpose to clarify the law (See Matter of Gleason (Michael Vee, Ltd.), 96 N Y2d at 122-23; Town of Cortlandt v New York State Bd. of Real Prop. Servs., 36 A.D.3d 823, 826 [2d Dept 2007]), particularly to remediate "unintended judicial interpretation" (Matter of Gleason (Michael Vee. Ltd.), 96 N.Y.2d at 122; see Brothers v Florence, 95 N.Y.2d 290, 299-300 [2000]), its remedial nature (see Matter of Hynson (American Motors Sales Corp.-Chrysler Corp), 164 A.D.2d 41. 48 [2d Dept 1990]), and the urgency of its application (see Matter of Gleason (Michael Vee, Ltd.), 96 N.Y.2d at 122; Brothers, 95 N.Y.2d at 299; cf. Marrero v Crystal Nails, 114 A.D.3d 101, 112-13 [2d Dept 2013]). Further, inasmuch as the Legislature enacted FAPA to remediate court decisions misconstruing law-applicable to mortgage foreclosure actions, which impacted such actions commenced prior to FAPA's enactment, to give prospective application to FAPA would undermine its remedial purpose (see Brothers, 95 N.Y.2d at 300; Matter of OnBank & Trust Co., 90 N.Y.2d 725. 731-32 [1997]; Nelson v HSBC Bank USA. 87 A.D.3d 995. 998 [2d Dept 2011]).
The court rejects plaintiffs arguments that the legislative materials were equivocal regarding the Legislature's intent for FAPA to apply retroactively and that they spoke only to stopping past practices. This court's conclusion that FAPA is expressly retroactive renders academic plaintiffs arguments regarding the legal standard for determining whether a statute is intended to have a retroactive effect when the intent is unclear, as well as whether the presumption against retroactive effect is triggered.
Plaintiff also contends that retroactive application of FAPA violates the Contracts Clause of the United States Constitution, which provides that "[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts" (US Const art I, § 10, cl 2; American Economy Ins. Co. v State of New York, 30 N.Y.3d 136, 149 [2017]; Matter of Raynor v Landmark Chrysler, 18 N.Y.3d 48. 58-59 [2011 ]; Consumers Union of U.S.. Inc. v State, 5 N.Y.3d 327. 359 [2005]). Specifically, plaintiff argues that retroactive application of FAPA would unconstitutionally impair its contractual and legal rights by rendering its mortgage interest unenforceable. The language in the Contract Clause should not be read literally as the states retain power to protect their peoples' vital interests (see Home Bldg. & Loan Assn, v Blaisdell, 290 U.S. 398, 434 [1934]; American Economy Ins. Co., 30 N.Y.3d at 149). Whether the state law has substantially impaired a contractual relationship is the threshold issue (see American Economy Ins. Co., 30 N.Y.3d at 150: 19th St. Assoc, v Stale of New York. 79 N.Y.2d 434. 442-43 [1992]). Here, plaintiff fails to point to any contract affected by retroactive application of FAPA. Even assuming that the mortgage, note or both are the contract upon which plaintiff relies, plaintiff identifies no provision impacted by-prohibiting extension of an applicable statute of limitations after the mortgage foreclosure action has accrued or precluding voluntary' discontinuance from having that effect (see generally American Economy Ins. Co., 30 N.Y.3d at 150; Matter of City of Yonkers v Yonkers Fire Fighters. Local 628. 1AFF. AFL-CIO, 20 N.Y.3d 651, 658 [2013]).
Plaintiff s request that the pre-FAPA right to revoke acceleration of the mortgage created by case law (see Freedom Mtge. Corp., 31 N.Y.3d at 31-32) should be read into its contract further illustrates the absence of a contract upon which to base its Contract Clause argument. Generally, state laws are implied into private contracts without the parties' consent when they affect the contract's validity, construction or enforcement (see General Motors Corp, v Romein, 503 U.S. 181. 189 [1992]: Home Bldg. & Loan Assn., 290 U.S. at 429-30: American Economy Ins. Co., 30 N.Y.3d at 154). Thus, the Contract Clause may prohibit impairment of obligations in pre-existing contracts through amendment of laws making the contracts legally enforceable even absent alteration of the contract terms (see General Motors Corp., 503 U.S. at 189; American Economy Ins. Co., 30 N.Y.3d at 154). Again, assuming that the note or mortgage constitute the contract, the right to revoke acceleration plaintiff seeks to have read into the contract does not affect the ability to enforce its terms (see General Motors Corp., 503 U.S. at 190: American Economy Ins. Co., 30 N.Y.3d at 154). Moreover, reading this provision into the contract directly contradicts the Legislature's stated purpose to "rectify erroneous judicial interpretations" and "overturn certain court decisions" and would effectively prevent the Legislature from amending the statutes relating to mortgage foreclosure actions (see General Motors Corp., 503 U.S. at 190; American Economy Ins. Co., 30 N.Y.3d at 154). Since plaintiff has not shown that FAPA's amendments impair any contract, determination of whether the impairment is substantial or justified by significant public purpose is unnecessary (see American Economy Ins. Co., 30 N.Y.3d at 153). and there is no need to address plaintiffs arguments on that score. Plaintiffs failure to identify the contract allegedly impaired by FAPA constitutes a failure to demonstrate a Contract Clause violation (see American Economy Ins. Co., 30 N.Y.3d at 154).
Plaintiff next contends that FAPA's retroactive application violates due process as it would impair plaintiff s vested interest in foreclosing the mortgage by prohibiting discontinuance of the action commenced by plaintiff's predecessor from resetting accrual of the applicable limitations period and effectively extinguishing plaintiff s action as time-barred. The Legislature's acts possess a strong presumption of constitutionality (see White v Cuomo. 38 N.Y.3d 209. 216 [2022]: American Economy Ins. Co., 30 N.Y.3d at 149; Matter of County of Chemung v Shah, 28 N.Y.3d 244, 262-63 [2016]; Overstock.com. Inc. v New York State Dept, of Taxation &Fin., 20 N.Y.3d 586, 59312013]). A party challenging the act must demonstrate its invalidity beyond a reasonable doubt (sec White, 38 N.Y.3d at 216; American Economy Ins. Co., 30 N.Y.3d at 149; Matter of County of Chemung, 28 N.Y.3d at 262; Overstock.com, Inc., 20 N.Y.3d at 593). To satisfy due process for retroactive application of a new statute, it must be supported by "a legitimate legislative purpose furthered by rational means" (Matter of Regina Metro. Co., LLC, 35 N.Y.3d at 375 quoting American Economy Ins. Co., 30 N.Y.3d at 157-58). A persuasive rationale for the possibly harsh impacts of retroactivity must also exist (see Matter of Regina Metro. Co., LLC, 35 N.Y.3d at 375: Holly S. Clarendon Trust v State Tax Commit, 43 N.Y.2d 933, 93511978]).
"Generally, there are two types of retroactive statutes that courts have found to be constitutional: those employing brief, defined periods that function in an administrative manner to assist in effectuating the legislation, and statutory retroactivity that - even if more substantial - is integral to the fundamental aim of the legislation" (Matter of Regina Metro., Co., LLC, 35 N.Y.3d at 376). The instant action falls under the second category. Thus, "[i]n cases where retroactivity is integral to full achievement of the fundamental purpose of the legislation, a rational basis for the retroactive effect may be readily identifiable" (Matter of Regina Metro. Co.. LLC, 35 N.Y.3d at 378). Here, a legitimate legislative purpose supports retroactive application of FAPA in that the legislative materials identify an "ongoing problem" and that the legislation's purpose is to "clarify the meaning of existing statutes, and to rectify these erroneous judicial interpretations thereof (Assembly Mem in Support of 2022 Assembly Bill A7737 enacted as L 2022, ch 821). Further, they provide that the "gravity of the aforementioned problem, and the legislature's determination to remedy same, is illustrated by the determination of the legislature in passing this bill to apply to all actions governed by CPLR 213 (4) in which a final judgment of foreclosure and sale has not yet been enforced" (Id.). The amendment of CPLR 3217 responds to Freedom Mtge. Corp. (37 N.Y.3d 1) and "will restore longstanding law that made it clear that lenders' discontinuance of a foreclosure action that accelerated a mortgage loan does not serve to reset the statute of limitations" (Assembly Mem in Support of 2022 Assembly Bill A7737 enacted as L 2022. ch 821). The Legislature justified FAPA noting that "[a]s a direct result of the aforementioned judicial decisions, thousands of New York homeowners who secured closure of their cases by operation of longstanding statute of limitations principles are at risk of an onslaught of successive foreclosure actions that would otherwise be barred by the statute of limitations under longstanding statutory and case law" (Id.). Thus, retroactive application of FAPA restores the intended repose afforded by the applicable statute of limitations, which the Legislature has made clear should be enforced as it had always intended. The Legislature's subsequent advisement to the court of its intent regarding a previous enactment is entitled to "very great weight" (Caprio v Aew York State Dept, of Taxation &Fin., 25 N.Y.3d 744, 755 [2015]; Matter of Chatlos v McGoldrick, 302 NY 380, 388 [1951]).
Since these stated objectives would not be met and FAPA's remedial purpose would fail if the statute's application were limited to actions commenced on or after the date of its enactment, retroactive application of FAPA is supported by a rational legislative purpose (see generally American Economy Ins. Co., 30 N.Y.3d at 158-59; Caprio, 25 N.Y.3d at 758; Matter of Raynor, 18 N.Y.3d at 59). FAPA's aim "to thwart and eliminate abusive and unlawful litigation tactics that have been adopted and pursued in mortgage foreclosure actions to manipulate the law and judiciary to yield to expediency and the convenience of mortgage banking and servicing institutions at the expense of finality and repose that statutes of limitation are meant to ensure" and the Legislature's finding that the continuation of time-barred foreclosure actions ''will cause the loss of countless homes and will burden the Courts" (Assembly Mem in Support of 2022 Assembly Bill A7737 enacted as L 2022, ch 821) furnish a persuasive rationale for impacts of dismissed claims.
Contrary to plaintiff's argument, despite a lack of empirical evidence supporting the Legislature's conclusion of widespread abuse of the law prior to FAPA's enactment in mortgage foreclosure actions, a strong presumption exists that the Legislature investigated and discovered facts supporting the legislation (see White, 38 N.Y.3d at 217). Even if the legislative materials referred to above were somehow insufficient, the court must assume the existence of factual support for the legislation (.see id.).
Finally, plaintiff contends that FAPA's retroactive application violates the Takings Clause of the Fifth and Fourteenth Amendments, which "prevents the Legislature (and other government actors) from depriving private persons of vested property rights except for a 'public use' and upon payment of 'just compensation" (Landgraf v USI Film Products, 511 U.S. 244. 266 [1994]: see American Economy Ins. Co., 30 N.Y.3d at 155; James Sq. Assoc. LP v Mullen, 21 N.Y.3d 233, 247 [2013]). The threshold inquiry is whether a vested property interest has been identified (see American Economy Ins. Co., 30 N.Y.3d at 155). Plaintiff bases its Takings Clause claim on a contractual right to de-accelerate the mortgage, but has not shown that such right is a vested property right. Thus plaintiff fails to identify "any vested property interest impaired by the legislative amendment" necessary to sustain a Takings Clause claim (American Economy Inc. Co., 30NY3d at 155).
As addressed above, FAPA is to be applied retroactively and is not constitutionally infirm. Thus, its amendment of relevant statutes furnishes a sufficient basis for renewal (see Dinallo v DAL Elec., 60 A.D.3d at 621). Since the June 12, 2012 notice of discontinuance "did not "in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim," (CPLR 3217[e]; ARCPE I. LLC v Dehrosse, ___A.D.3d ___, 2023 NY Slip Op 03498 *1 [2d Dept 2023]; G MAT Legal Title Trust 2014-1 v Kator, 213 A.D.3d 915 [2d Dept 2023]), the acceleration of the mortgage in the action commenced November 17, 2010 was not effectively revoked. Thus, this action commenced July 28. 2017 is time-barred (see CPLR 213[4]: ARCPE I. LLC, 2023 NY Slip Op 03498 *1; MTGLQ Investors. L.P. v Singh. ___ A.D.3d ___, 2023 NY Slip Op 02779 *2 [2d Dept 2023]).
Accordingly, Gustavia's motion to renew plaintiffs motion for summary judgment and appointment of a referee is granted. Upon renewal, the court vacates its prior order entered March 9, 2022. and denies plaintiffs motion for summary judgment and appointment of a referee. Upon searching the record, plaintiff s action is dismissed as time-barred.