Opinion
Index No. 030845/2017
01-16-2019
KONDAUR CAPITAL CORPORATION, as Separate Trustee of Matawin Ventures Trust Series 2015-1, Plaintiff, v. CAROLYN A. LOUGHRAN, TERRENCE T. LOUGHRAN, UNITED STATES OF AMERICA O/B/O INTERNAL REVENUE SERVICE, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, ORANGE AND ROCKLAND UTILITIES, BERGEN ANESTHESIA GROUP, ROBERT W. GANLEY, PASHMAN STEIN P.C., and "JOHN DOE # 1" through "JOHN DOE # 10", the last ten names being fictitious and unknown to Plaintiff, the person or parties intended being the person or parties, if any, having or claiming an interest in or lien upon the mortgage premises described in the complaint, Defendants.
NYSCEF DOC. NO. 39 To commence the statutory time period for appeals as of right (CPLR 5513 [a]), you are advised to serve a copy of this order, with notice of entry, upon all parties. DECISION AND ORDER Motion date: Oct. 10, 2018
Motion Seq. No. 1
The following papers numbered 1 to 5 were read on Defendants Carolyn A. Loughran and Terrence T. Loughran's Motion to Dismiss Complaint:
Notice of Motion to Dismiss Complaint/Proposed Decision and Order/Affirmation of Carl J. Nelson, Esq./Memorandum of Law/Exhibits A-F ....................................................... 1-3
Affirmation of Michael P. Amodio, Esq./Exhibits 1-2 ........................................................ 4
Reply Memorandum of Law ........................................................................ 5
Upon reading the foregoing papers, it is ORDERED that the motion is disposed as follows. BACKGROUND
On February 22, 2017, Plaintiff commenced this mortgage foreclosure action by filing a Summons and Complaint and Notice of Pendency. Plaintiff alleged that it is the current holder of the Note and mortgage for the premises located at 77 North Main Street, Pearl River, New York.
The loan was originated by Washington Mutual Bank F.A. on November 28, 2006 to Defendant Carolyn A. Loughran in the principal sum of $340,000.00. The Note was secured by a mortgage on the premises executed by Defendants Carolyn A. Loughran and Terrence T. Loughran.
Plaintiff alleged that the Note and mortgage were assigned to JPMorgan Chase Bank NA ("JPMorgan") and then to NRZ Pass-Through Trust IV, U.S. Bank NA as Trustee. Thereafter, the Note and mortgage were assigned to Plaintiff.
Plaintiff alleged that on September 24, 2010, JPMorgan commenced a prior action against Defendants to recover on the Note and mortgage under Rockland County Index Number 12363/2010 (the "2010 Foreclosure"). In that action, JPMorgan alleged that Defendants defaulted by failing to make payments beginning July 1, 2009.
Plaintiff alleged that on September 5, 2013, Ms. Loughran entered into a Loan Modification Agreement with JPMorgan, effective October 1, 2013, which altered the interest rate, monthly payment amount and maturity date of the loan. Plaintiff alleged that Defendants failed to comply with the terms of the Loan Modification Agreement and mortgage by not making the monthly payments.
On August 21, 2013, Defendant Terrence Loughran filed a Chapter 13 bankruptcy proceeding. Mr. Loughran listed the mortgage on his schedule of secured claims in the bankruptcy proceeding. On November 14, 2013, Mr. Loughran submitted a stipulation and order to the Bankruptcy Court seeking approval of a loan modification between himself and JPMorgan. On November 15, 2013, the Bankruptcy Court approved the loan modification. On December 20, 2013, Mr. Loughran moved to dismiss his bankruptcy case. On December 23, 2013, the Bankruptcy Court signed an order granting the motion. On June 23, 2014, the bankruptcy case was closed.
In July 2014, after the bankruptcy proceeding terminated, JPMorgan assigned the mortgage loan to NRZ Pass-Through Trust IV, U.S. Bank National Association as Trustee ("NRZ"). In July 2016, JPMorgan moved to discontinue the mortgage foreclosure action against Defendants.
Upon assignment of the Note, mortgage and Loan Modification Agreement to Plaintiff herein, Plaintiff elected to declare the entire unpaid principal balance of the amount secured by the Loan Modification Agreement to be due and payable. On February 22, 2017, Plaintiff filed and served the Summons and Complaint against Defendants.
On April 5, 2017, Defendants Carolyn A. Loughran and Terrence T. Loughran filed the instant motion to dismiss.
On June 16, 2017, the case was erroneously marked disposed. On August 1, 2018, the matter was restored to the Court's active calendar and referred to the Foreclosure Settlement Conference Part. A conference was held on August 20, 2018, wherein it was determined that the matter was not eligible to proceed in that Part because the subject property was not owner occupied. It was released from the Part and assigned to the undersigned.
On September 28, 2018, this Court held a conference in the case. The Court issued a briefing schedule on the pending motion to dismiss and scheduled a further conference on December 12, 2018.
On December 12, 2018, the Court heard oral argument on the motion. DISCUSSION
Defendants contend that the action is barred by the statute of limitations because the date of their default on the Note and mortgage was unchanged by the Loan Modification Agreement since they failed to make the agreed payments. Defendants argue that their mortgage loan was not modified by the Agreement, because the Agreement expressly stated that the mortgage loan would only be amended if the payments were made, which Defendants failed to do. Defendants argue further that the trial modification payments they made prior to executing the Agreement did not have the effect of restarting the statute of limitations, because they did not constitute an absolute and unqualified acknowledgement of more being due and a promise to pay the remainder.
Defendants contend that, as a result, the date of their default remained the original date of July 1, 2009. Under that rationale, Plaintiff's filing of this action on February 22, 2017 was untimely, because the six-year statute of limitations had already expired. Defendants acknowledge that the Chapter 13 bankruptcy proceeding tolled the statute of limitations, but they argue that the tolling was only up to the date that the Bankruptcy Court granted dismissal of the proceeding on December 23, 2013, rather than the date the case was closed on June 23, 2014. Thus, by Defendants' reckoning, this action was untimely filed by 27 days.
Plaintiff argues that Ms. Loughran's execution of the Loan Modification Agreement on September 5, 2013 restarted the statute of limitations. Plaintiff also contends that acceptance by its predecessor JPMorgan of the three trial modification payments constituted a waiver of its acceleration of the debt and restarted the running of the limitations period. Finally, Plaintiff asserts that the limitations period began to run anew when the Bankruptcy Court confirmed Mr. Loughran's Chapter 13 plan and the bankruptcy case was closed. Plaintiff submits a copy of the docket for Mr. Loughran's bankruptcy case and relies on PSP-NC, LLC v Raudkivi, 138 AD3d 709, 711 [2nd Dept 2016], in support of its contention that confirmation of the bankruptcy plan restarted the limitations period.
Indeed, the PACER print out of the docket for Mr. Loughran's bankruptcy proceeding shows that a Stipulation and Order signed on 11/14/2013 was approved by the Bankruptcy Court on 11/15/2013. The entry states that the Bankruptcy Court approved "Loan Modification between the Debtor and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION." Within five days thereafter, Mr. Loughran moved to dismiss the bankruptcy proceeding. Mr. Loughran submitted a Chapter 13 bankruptcy plan in which he acknowledged the mortgage debt and promised to repay it. The docket entry shows that Plaintiff accepted the bankruptcy plan, because it was submitted pursuant to a stipulation between JPMorgan and Mr. Loughran.
It is clear from Raudkivi, supra, that acknowledgment by a debtor of a mortgage debt and promise to repay by way of an approved bankruptcy plan has the effect of renewing the limitations period. Id. at 711 (citing General Obligations Law § 17-105[1]; National Loan Invs., L.P. v Piscitello, 21 AD3d 537, 538; Albin v Dallacqua, 254 AD2d 444, 445; see e.g. Lew Morris Demolition Co. v Board of Educ. of City of N.Y., 40 NY2d 516, 520-521). The Appellate Division further held in Raudkivi that execution of the Chapter 13 bankruptcy plan tolled the renewed limitations period, (see CPLR 204[a]; Zuckerman v 234-6 W. 22 St. Corp., 267 AD2d 130; cf. Saini v Cinelli Enterprises Inc., 289 AD2d 770, 771), which did not then begin to run until the debtor was granted his discharge in bankruptcy.
Under the authority of Raudkivi, this action was timely commenced in February 2017, less than six years after Mr. Loughran's bankruptcy plan was approved and the action was dismissed on his motion in December 2013.
For her part, Ms. Loughran reaffirmed the mortgage loan when she executed the Loan Modification Agreement. Ms. Loughran contends the provision in GOL § 17-105 which states that "the express terms of a writing signed by the party to be charged is effective, subject to any conditions expressed in the writing" operates to invalidate the Agreement because the mortgage loan would be modified only if she made her payments. She argues that because the Agreement was conditioned upon her making the payments and she failed to make them, the Agreement could not renew the limitations period. The Court is not persuaded by Ms. Loughran's argument that her failure to make the payments invalidated her ratification of the mortgage loan by entering into the Agreement.
Defendants made all three trial modification payments, which arguably constituted an acknowledgment of the debt sufficient to toll and renew the statute of limitations, pursuant to GOL § 17-101, given that the purpose of the payments was to determine Defendants' ability to sustain a loan modification. The Court declines to address the issue of whether the trial payments would be sufficient to ratify the debt since Ms. Loughran later executed the Loan Modification Agreement.
This language likely refers to a provision in a written agreement which is specific to the limitations period.
Moreover, JPMorgan's execution of the Loan Modification Agreement revoked its acceleration of the debt. See Bank of New York v Hutchinson, 57 Misc 3d 1204(A) [Sup Ct, Kings County 2017]. The Loan Modification Agreement constitutes "an affirmative act of revocation occurring during the six year limitations period subsequent to the initiation of the prior action". See generally Kahsipour v Wilmington Sav. Fund Socy., FSB, 144 AD3d 985 [2nd Dept 2016]; Clayton Nat'l, Inc., v Guldi, 307 AD2d 982 [2nd Dept 2003]; Lavin v Elmakiss, 302 AD2d 638 [3rd Dept 2003].
"'A foreclosure action is equitable in nature and triggers the equitable powers of the court (see Notey v Darien Constr. Corp., 41 NY2d 1055 [1977]; Jamaica Sav. Bank v M.S. Inv. Co., 274 NY 215 [1937]; Mortgage Elec. Registration Sys., Inc. v Horkan, 68 AD3d 948 [2nd Dept 2009]). 'Once equity is invoked, the court's power is as broad as equity and justice require'. (Mortgage Elec. Registration Sys., Inc. v Horkan, supra at 948 (quoting Norstar Bank v Morabito, 201 AD2d 545 [2nd Dept 1994])." Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9, 15 [2nd Dept 2013].
The Court cannot condone Defendants' efforts to invalidate their mortgage loan. It appears that Ms. Loughran may have utilized her husband's bankruptcy filing to excuse her obligation to make the required payments under the Loan Modification Agreement. Her failure to make the payments she agreed upon does not void her ratification of the mortgage debt by entering into the Agreement. Mr. Loughran clearly ratified the mortgage loan by including the debt in his bankruptcy proceeding and incorporating a loan modification with JPMorgan into his bankruptcy plan. As a result, the statute of limitations has not run on the obligation agreed to by both parties and this action was timely.
While listing the mortgage on his schedule of secured claims, standing alone, would not have constituted ratification of the debt, Saini v Cinelli Enterprises, Inc., 289 AD2d 770, 772 [3rd Dept 2001], including the Loan Modification in his bankruptcy plan clearly did.
Accordingly, Defendants' motion to dismiss is denied. Defendants shall file and serve an Answer to the Complaint on or before February 13, 2019. The conference scheduled for February 13, 2019 is cancelled.
The parties shall appear for a conference before the undersigned on April 15, 2019 at 9:15 a.m.
The foregoing constitutes the Decision and Order of this Court. Dated: January 16, 2019
New City, New York
ENTER
/s/_________
HON. PAUL I. MARX, J.S.C.