Opinion
Index No. 033268/2022 Motion Sequences 1 2
10-11-2023
ANTHONY TOMALA, Plaintiff, v. CALIBER HOME LOANS, INC., Defendant.
Unpublished Opinion
DECISION AND ORDER
HON. AMY S. PUERTO, JUSTICE
The following papers (e-filed documents 10-20, 22-28, 30-32, 38, 40 and 41) were read on the e-filed motion by CALIBER HOME LOANS, INC., to dismiss the action, and on the e-filed cross-motion by ANTHONY TOMALA to grant summary judgment on his complaint and cancel and discharge the subject mortgage:
Papers
Notice of Motion, Affirmation in Support, Memorandum of Law, Statement of Material Facts
(Exhibits A-F)
Notice of Cross Motion, Affirmation in Support of Cross-Motion, Memorandum of Law, Response to Statement of Material Facts (Exhibits A-C)
Memorandum of Law in Opposition to Cross-Motion
Memorandum of Law in Reply (Exhibit A)
Upon reading the foregoing papers, it is hereby
ORDERED that the motion by CALIBER HOME LOANS, INC., seeking an order dismissing the action is DENIED; it is further
ORDERED that the motion by ANTHONY TOMALA seeking an order of summary judgment is GRANTED; and it is further
ORDERED that the subject mortgage for the property located at 13 Rosman Road, Haverstraw, New York 10984, is hereby discharged and cancelled, On or about August 20, 2014, ANTHONY TOMALA ("plaintiff) executed a note for property located at 13 Rosman Road, Haverstraw, New York ("the property"), in the amount of $319,113.00 in favor of Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Total Group in lieu of True Corporate Name Total Mortgage Services, LLC. On or about April 7, 2023, this mortgage was assigned to CALIBER HOME LOANS, INC. ("defendant").
On or about July 21, 2015, defendant filed a summons and complaint against plaintiff for defaulting on the aforementioned mortgage ("foreclosure action"). The complaint called the entire debt due, thereby accelerating the mortgage. After more than four years of litigation, this Court (J. Berliner) determined that defendant failed to comply with the terms of 24 CFR § 203.604 and thus, never properly initiated the action. Accordingly, the foreclosure action was dismissed and notice of pendency was canceled.
On or about December 3, 2019, defendant mailed plaintiff a letter stating that "as of the date of this letter, the maturity of the Loan is hereby revoked and de-accelerated, immediate payment of all sums owed is hereby withdrawn, and the Loan is re-instituted as an installment loan with monthly payments being due and owing" and that "any previous acceleration" of the loan was revoked (Dodson Affirmation, Exhibit A).
On or about July 27, 2022, plaintiff commenced this action pursuant to section 1501(4) of the Real Property Actions and Proceedings Law ("RPAPL"), which allows a person with an interest in real property that is subject to the encumbrance of a mortgage to "maintain an action against any other person or persons. . . to secure the cancellation and discharge of record of such encumbrance and to adjudge the . . . interest of the plaintiff in such real property to be free therefrom" when "the period allowed by the applicable statue of limitation for the commencement of an action to foreclose a mortgage" on the property "has expired" (RPAPL §1501 [4]). It is plaintiff s claim that since defendant accelerated the loan in July of 2015 when it filed the foreclosure action, the six-year statute of limitations pursuant section 213(4) of the Civil Practice Law and Rules (CPLR), has expired and the mortgage must be canceled.
Defendant moves for summary judgment, seeking to dismiss the action on the grounds that plaintiff is mistaken in his belief that the statute of limitations on the foreclosure action on the property has expired. Defendant claims to have effectively de-accelerated the loan by way of its December 3, 2019, correspondence, and relies on the Court of Appeals case of Freedom Mortgage Corporation v. Engel. 37 N.Y.3d 1 (2021), and others like it, for the proposition that a noteholder may de-accelerate a debt with an affirmative act revoking the acceleration within the statute of limitations. Additionally, defendant contends that the enactment of the Foreclosure Abuse Prevention Act ("FAPA"), subsequent to the issuance of the de-acceleration letter is of no consequence, since the FAPA's unilateral de-acceleration prohibition only applies to "actions then-pending in which a final judgment of foreclosure and sale has not been enforced," and this proceeding, is not (Memorandum of Law in Support, p. 4). Moreover, they argue that a retroactive application of the FAPA violates the due process clause, the takings clause, and the contracts clause of the constitution.
In the alternative, defendant argues that the 2015 foreclosure action never accelerated the loan and thus, the statute of limitation has not even started running. Defendant claims that since the court determined that it failed to comply with 24 CFR §203.604(b) in initiating the action, a condition precedent to the complaint is absent and accordingly, "the complaint cannot be deemed to have accelerated the mortgage" (id at p. 6).
Plaintiff responds by cross-moving for summary judgment, relying heavily on the recently enacted FAPA, which added the following provision to the CPLR with respect to foreclosure actions: "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 203[h]). Therefore, according to plaintiff, defendant's affirmative, yet unilateral, act of sending its December 3, 2019, correspondence attempting to de-accelerate the loan, did not toll the statute of limitations once the loan had been accelerated. Further, he argues that it is of no consequence that this de-acceleration letter pre-dated the enactment of the FAPA, as the FAPA provisions are to be applied retroactively since it is legislation that is remedial in nature.
Moreover, plaintiff disputes defendant's alternative argument that the loan was never accelerated in the first place, since nothing the court's "Decision and Order, dismissing the Foreclosure Action indicates that Defendant's failure to comply with 24 CFR §203.604(b) renders its acceleration invalid" (Memorandum of Law in Support of Cross-Motion, p. 9). For all of these reasons, plaintiff submits that he has met his burden of establishing that the statute of limitations to file a foreclosure action has run and should be granted summary judgment.
Legal Analysis
CPLR 213(4) governs the statute of limitations as it relates to foreclosure actions, stating that "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" must be commenced within six years (CPLR 231 [4]). As to when the statute of limitations starts running, New York Courts have consistently held that, "even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the [s]tatute of [limitations begins to run on the entire debt" (EMC Mortgage Corp. v. Patella, 29 A.D.2d 604, 605 [2d Dept. 2001]; see also Bank of N.Y. Mellon Corn, v. Alavarado, 189 A.D.3d 1149 [2d Dept. 2020]: Nationstar Mrte., LLC v. Weisblum, 143 A.D.3d 866 [2d Dept. 2016]). Prior to the enactment of the FAPA, and pursuant to Engel. a debt could be de-accelerated, and the statute of limitations tolled, if the lender made an affirmative act, such as the December 3, 2019, letter, revoking the acceleration. Indeed, the reason for the de-acceleration was inconsequential, with the Court in Engel expressly rejecting the argument that "a lender should be barred from revoking acceleration if the motive of the revocation was to avoid the expiration of the statute of limitations on the accelerated debt," and noting that the lender's "motivation for exercising a contractual right is generally irrelevant" (37 N.Y.3d at 36).
However, that changed on December 30, 2022, when New York passed the FAPA, which became effective immediately, and applies to all foreclosure actions "in which a final judgment of foreclosure and sale has not been enforced" (FAPA §10). The legislature's intent is clear in the statute's very name - to avoid abuses in foreclosure matters. In clear reference to the court's decision in Engel, the Senate explained that the legislation was aimed at the "ongoing problem with abuses of the judicial foreclosure process," which "has been exacerbated by 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" (2021 N.Y. Senate Bill 5473D). The legislature went on to state that the "remedial legislation is to clarify the meaning of existing statutes, codify correct judicial applications thereof, and rectify erroneous judicial interpretations thereof and, relevant to the case at bar, applies equally "to all litigants, including those currently involved in mortgage foreclosures and related actions" (id; emphasis added).
Relying on the legislative intent of the FAPA, the court finds that the FAPA applies to a complaint filed pursuant to RPAPL 1501(4). Indeed, section 213(4) of the CPLR indicates that "[i]n any action seeking cancellation and discharge of record of an instrument described under [RPAPL §1501(4)], a defendant shall be estopped from asserting that the period allowed by the applicable statute of limitation for the commencement of an action upon the instrument has not expired because the instrument was not validly accelerated prior to, or by way of commencement of a prior action, unless the prior action was dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated" (CPLR 213[4]). Had the drafters of the new legislation not intended for an action filed pursuant to RPAPL §1501(4) to be considered a "foreclosure action," they would not have included it in one of the amended provisions.
Moreover, since the decision and order dismissing the original foreclosure action in this case did not expressly determine that the instrument was not validly accelerated, the court finds such argument made by the defendant to be without merit (see CPLR 213[4][b]); U.S. Bank National Association v. Outlaw, 217 A.D.3d 721 [2d Dept. 2023]).
Additionally, this court finds that the FAPA should be applied retroactively. "In determining whether a statute should be given retroactive effect, we have recognized two axioms of statutory interpretation. Amendments are presumed to have prospective application unless the Legislature's preference for retroactivity is explicitly stated or clearly indicated. . . However, remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose" fin re Gleason [Michael Vee, Ltd.], 96 N.Y.2d 117, 122 [2001]). Additional factors to consider in the evaluation of whether to apply legislation retroactively include "whether the Legislature has made a specific pronouncement about retroactive effect or conveyed a sense of urgency; whether the statute was designed to rewrite an unintended judicial interpretation; and whether the enactment itself reaffirms a legislative judgment about what the law in question should be" (id; see also Brothers v. Florence, 95 N.Y.2d 290 [2000]). Considering those factors when reviewing the FAPA's legislative history, it is unmistakable that the Legislature intended to "rewrite an unintended judicial interpretation" and that they wished to do so immediately. This is certainly a view shared by several New York Courts, including the Appellate Division, Second Department, which has been applying the FAPA retroactively since its passage (see GMAT Legal Title Trust 2014-1 v. Kator, 213 A.D.3d 915 [2d Dept. 2023]; UJL Bank National Association v. Simon, 216 A.D.3d 1041 [2d Dept. 2023]; Deutsche Bank National Trust Company v. Wong, 218 A.D.3d 742 [2d Dept. 2023]; U.S. Bank Trust. N.A. as Trustee for LSF9 Master Participation Trust v. Miele, ___ N.Y.S.3d ___ [Sup. Ct., Westchester County, June 7.1. 2013]: U.S. Bank National Association as Trustee to Wachovia Bank v. Williams, 80 Misc.3d 258 [Sup. Ct., Putnam County, June 23, 2023]).
Finally, the court is unpersuaded by the constitutional arguments only first raised by the defendant in its Reply to plaintiffs opposition to its motion. First, defendant argues that the retroactive application of the FAPA provision that prohibit a lender from unilaterally deaccelerating a debt violates the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution. When engaging in an analysis to determine whether the retroactive application of a statute has constitutional implications, the court must first determine whether the "application of a new statute to conduct that has already occurred" actually has a "'retroactive' effect upsetting reliance interests and triggering fundamental concerns about fairness" (Regina Metropolitan Co., LLC v. New York State Division of Housing & Community Renewal, 35 N.Y.3d 332, 365 [2020]; citing Landgraf v. US1 Film Prods, 511 U.S. 244 [1994]). "A statute has retroactive effect if 'it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed,' thus impacting 'substantive' rights" (id; citing Landgraf, 511, at 278-280). Conversely, "a statute that affects only 'the propriety of prospective relief or the nonsubstantive provisions governing the procedure for adjudication of a claim going forward has no potentially problematic retroactive effect even when the liability arises from past conduct" (id; citing Landgraf, 511, at 273).
Assuming that a retroactive application of the FAPA would impair a right that defendant possessed at the time that it acted -that is, the right to unilaterally de-accelerate plaintiffs mortgage to toll the statute of limitations - and thus, has a "retroactive effect," the court must proceed with a "presumption against retroactivity" (id at 370). To overcome this presumption, there must be a "clear expression of the legislative purpose ... to justify a retroactive application" (Gleason v. Gleason, 26 N.Y.2d 28, 36 [1970] [internal quotation marks and citation omitted]). Additionally, "the expression of intent must be sufficient to show that the Legislature contemplated the retroactive impact on substantive rights and intended that extraordinary result" (Regina Metropolitan Co.. LLC at 370, 371). In explaining the intent behind the FAPA amendments, the legislature stated unequivocally that it sought to prevent "loan servicers" from "manipulating] statutes of limitation to their advantage" and, inter alia, to "rectify erroneous judicial interpretations" of existing statutes (2021 N.Y. Senate Bill 5473D). The very purpose of the legislation was to look back and remediate what the legislature deemed to be the inequitable effects of foreclosure litigation on borrowers. The court finds this legislative explanation sufficient to establish its acknowledgement that the amendments would, and should, impair this pre-existing right of lenders.
With respect to its remaining constitutional arguments, the defendant asserts that the retroactive application of the FAPA violates the Contract Clause of the United States Constitution, which "prohibits states from enacting [l]aw[s] impairing the Obligation of Contracts" (American Economy Ins. Co. v. State, 30 N.Y.3d 136, 149 [2017] [citation and quotation omitted]). To determine whether a law impairs such an obligation, a court must ascertain whether there was a contractual relationship in the first place, "whether [the] change in law impairs that contractual relationship, and whether the impairment is substantial" (American Inc. Co., at 150: citing General Motors Corp. v. Romein, 503 U.S. 181, 186 [1992]). While it is uncontroverted that the parties had a contractual relationship, there was nothing in that contractual relationship that assured defendant its right to unilaterally de-accelerate the debt once it was accelerated. Defendant's reliance on the Engel case does nothing to alter this conclusion.
Defendant's contention that the retroactive application of the FAPA violates the Takings Clause of the Constitution similarly fails. "The Takings Clause prevents government actors from depriving private persons of vested property rights except for a public use and upon payment of just compensation" (James Square Associates LP v. Mullen, 21 N.Y.3d 233, 247 [2013] [citations and quotations omitted]). "'[A] party challenging governmental action as an unconstitutional taking bears a substantial burden' and evaluating whether an action is a 'taking' requires a court to consider the 'economic impact of the regulation, its interference with reasonable investment backed expectations, and the character of the governmental action'" (id, quoting Landgraf, 511 U.S. at 523-524). Defendant argues that the mortgage they hold on 13
Rosman Road is a form of property and that prohibiting them from enforcing the mortgage through a foreclosure proceeding renders the property valueless. But in truth, for many years, and long before the enactment of FAPA, there has been a six-year statute of [imitations limiting and note-holder's ability to enforce a mortgage. The fact that the statute of limitations can no longer be tolled by way of a unilateral de-acceleration does not render the inability of the bank to file a foreclosure action a taking.
Accordingly, the court finds that plaintiff has met his burden of establishing that the statute of limitations on an action to foreclose upon the mortgage has run. Defendant has failed to overcome that burden. Therefore, plaintiffs motion for summary judgment is granted and the mortgage is cancelled and discharged.
All other arguments made by each of the parties in their motion papers have been considered by the court, notwithstanding the court's failure to specifically address them in this decision and order.
This constitutes the decision and order of this court.