Opinion
Index No. 850131/2022 Motion Seq. No. 002
10-23-2023
Unpublished Opinion
PRESENT: HON. FRANCIS A. KAHN, III Justice
DECISION + ORDER ON MOTION
FRANCIS A. KAHN, JUDGE
The following e-filed documents, listed by NYSCEF document number (Motion 002) 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70 were read on this motion to/for JUDGMENT - SUMMARY.
Upon the foregoing documents, the motion is determined as follows:
Plaintiff commenced this action, on June 30, 2022, to foreclose on a mortgage encumbering real property located at 1438 Third Avenue, Unit 28D, New York, New York. The mortgage, dated July 3, 2007, was given by Defendant Judy Farkas ("Farkas") to Mortgage Electronic Registration Systems, Inc. as nominee for Countrywide Bank, FSB, a non-party. The mortgage secures a loan with an original principal amount of $620,000.00 which is evidenced by a note of the same date as the mortgage. Plaintiff pled in the complaint that Farkas defaulted in repayment of the loan.
This action was preceded by two prior actions to foreclose on the same mortgage. Non-party Citibank, NA ("Citibank"), the alleged noteholder at the time, commenced an action to foreclose the mortgage on April 1, 2008, by filing a summons and complaint (NY Cty Index No 104677/2008). In that complaint Citibank pled that it "elects to call due the entire amount secured by the mortgage". By order dated February 25, 2013, Plaintiff s motion to discontinue that action pursuant to CPLR §3217 was granted. Tn addition to relying on this discontinuance as a de-accelcration event, Plaintiff claims that it expressly de-accelerated the indebtedness by letter sent to the Mortgagors, dated December 19, 2014. Plaintiff commenced another action, in 2017. to foreclose on the mortgage at issue (NY Cty Index No. 850224/2017). Defendant Farkas defaulted in appearing. By order dated August 17, 2021, Farkas' motion to vacate her default based upon lack of personal jurisdiction was granted to the extent that a j traverse hearing was scheduled. The hearing was adjourned twice for Plaintiffs process server to appear. When the process server failed to appear a second time, this Court dismissed the action by order dated December 14, 2021.
Now, Defendant Farkas moves to dismiss pursuant to CPLR §3211 [a][5] and to cancel the notice of pendency based pursuant to the amendments made to the applicable statutes under the Foreclosure Abuse Prevention Act ("FAPA")(L 2022, ch 821 [eff Dec. 30, 2022]). Plaintiff opposes the motion positing, inter alia, that FAPA has neither retroactive effect nor application as well as that retroactive application of FAPA would violate the Due Process clauses of the Fifth and Fourteenth Amendments to the United States Constitution and the Takings Clause thereof.
The initial inquiry' must be whether the enactments in FAPA are retroactively applicable to this action. FAPA is comprised of multiple amendments to existing statutes and the enactment of new edicts. FAPA is comprised of multiple amendments to existing statutes and the enactment of new' edicts. The express purpose of FAPA, according to the Senate Sponsor Memo, was to "overrule the Court of Appeals' recent decision in Freedom Mtge. Corp, v. Engel" as well as certain other judicial decisions perceived to be "inconsistent with the intent of the Legislature" (NY State Senate Bill S5473D at Sponsor Memo, Justification). Similarly, the Assembly Memorandum in Support of Legislation states enactment of FAPA was necessary "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" (NY State Assembly Bill A7737B at Sponsor Memo, Purpose and Intent of Bill). The decision in Freedom Mtge. Corp, v. Engel, 37 N.Y.3d 1 (2021) is specifically targeted by FAPA's legislative "response" which "restorer longstanding law that made it clear that a lenders' discontinuance of a foreclosure action that accelerated a mortgage loan does not serve to reset the statute of limitations" (id.). As to its applicability, Section 10 of FAPA provides that it "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 L 2022, ch 821 [eff Dec. 30, 2022]).
As relevant here, the applicable statute of limitations, CPLR §213 [4], was amended to provide that" [i]n any action on an instrument described under this subdivision, if the statute of limitations is raised as a defense, and it that defense is based on a claim that the instrument at issue was accelerated prior to, or by way of commencement of a prior action, a plaintiff shall be estopped from asserting that the instrument was not validly accelerated, 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 §214[4][a]). CPLR §203 was also amended to add subdivision [h] which provides that:
Once a cause of 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 was also amended to add a new subdivision [e] which states that "[i]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" (CPLR §3217[e]).
With respect to the application of newly enacted civil legislation to conduct that has already occurred, a tension exists between the ordinarily recognized presumption against retroactive application of a statute and the basic principle that a court should apply the law in existence when rendering its decision (see eg Landgraf v. Usi Film Prods., 511 U.S. 244, 272 [1994]; see also Matter of Regina Metro. Co., LLC v. New York State Div. of Hous. & Community Renewal, 35 N.Y.3d 332, 365 [2020]). The concerns that arise when reviewing these two construction canons include, but are not limited to, giving proper effect to remedial legislation, disturbing a party's reliance on previously existing legal principles and recognition of fundamental fairness. But not all newly enacted statutes have retroactive effect despite affecting past actions. But not all newly enacted statutes have retroactive effect despite apparent facial applicability to existing actions. The Court of Appeals has adopted a "framework" established by the United States Supreme Court for analyzing this issue which is as follows:
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. On the other hand, a statute that affects only the propriety of prospective relief or the non substantive 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.(Regina, supra at 366 [internal citations and quotations omitted]).
Plainly, the portions of FAPA that are applicable here have retroactive effect upon this and many other existing foreclosure actions. The applicability of the so-called "savings provision" under CPLR §205 was substantially altered if not virtually eliminated in foreclosure actions. A response by the Legislature to the Court of Appeals' decision in Engel, as well as multiple decisions of the Appellate Division interpreting CPLR §205, was not unexpected but the scope of the new procedures enacted in FAPA are significant (see Bruce J. Bergman, Foreclosure Abuse Prevention Act: Time and Settlement, NYLJ, August 29, 2023, at 5, col 2). The question therefore becomes whether retroactive application is justified.
For a statute to be afforded retroactive application, there must be a clear expression of the legislative purpose demonstrating that the legislature contemplated the potential unfairness of retroactive application and assessed that the benefits of application to existing cases and past conduct is an acceptable price to pay (Regina, supra at 366, 370). The inquiry to be resolved is "whether the legislature has expressed a sufficiently clear intent to apply the . . . amendments retroactively to these pending appeals. There is certainly no requirement that particular words be used-and, in some instances, retroactive intent can be discerned from the nature of the legislation" (id.).
Based on the express terms of the statute, the overall remedial construction of the legislation and the multiple unambiguous statements of legislative intent in FAPA's history as recounted supra, FAPA was plainly intended to apply retroactively. In the NY State Senate version of the bill, citation is made to Gleason v. Michael Vee, Ltd., 96 N.Y.2d 117 [2001]. In that case, the Court of Appeals held that retroactive application of an amendment to CPLR §7502[a], which was intended to overrule a precedent established by the Court of Appeals to cases dismissed in the interval between disputed I decision and the legislative response, was intended despite the Legislature's silence on retroactivity.' The Court of Appeals reasoned that retroactive application was intended by the immediate effectiveness of the statute and its purpose "to clarify what the law was always meant to do and say". Both those intents were undoubtedly expressed by the Legislature in support of FAPA.
Solka v. Solartechnik, G.m.b.H. v. Besicorp Group Inc., 91 N.Y.2d 482 [1998].
Additionally, the Appellate Divisions for the First and Second Departments have tacitly acknowledged this conclusion by applying FAPA to various existing cases (see U.S. Bank N.A. v Santos, 218 A.D.3d 827 [2d Dept 2023]; Deutsche Bank Natl. Trust Co. v. Wong, 218 A.D.3d 742 [2d Dept 2023]; U.S. Bank N.A. v Simon, 216 A.D.3d 1041 [2d Dept 2023]; Bank of N.Y. Mellon v Stewart, 216 A.D.3d 720' [2d Dept 2023]; U.S. Bank N.A. v. Fox, 216 A.D.3d 445 [1st Dept 2023]; GMAT Legal Title Trust 2014-1 v. Kator, 213 A.D.3d 915 [2d Dept 2023]). The Appellate Division, First Department's decision in U.S. Bank N.A. v Fox, supra is particularly telling. In Fox, this Court, dismissed Plaintiffs complaint as: untimely reasoning that the savings provision under CPLR §205 did not apply since a prior 2010 action for foreclosure was dismissed by Justice Mary V. Rosado for failure to prosecute at trial (see U.S. Bank N.A. v. Fox, ___ Misc.3d ___, 2022 NY Slip Op 30555[U][Sup Ct NY Cty 2022][Kahn III, J.]). On appeal, but after the enactment of FAPA, the First Department initially reversed this Court's decision, and reinstated Plaintiffs complaint (see U.S. Bank N.A. v. Fox, 212 A.D.3d 422, 424 [1st Dept 2023]). The First Department reasoned, under then applicable precedent, that CPLR §205 was applicable since Justice Rosado failed to set forth a "general pattern of delay" by the lender in her decision (id.) . Soon thereafter, the First Department permitted the parties "to brief the effect of FAPA on [that] case". Upon such further briefing, the First Department "recalled and vacated" its earlier decision and "unanimously affirmed" this Court's decision reasoning that FAPA "applie[d] to [that] foreclosure action" and that "plaintiff [was] statutorily barred from commencing [that] action" (see U.S. Bank N.A. v. Fox, 216 A.D.3d at 446-447). Were FAPA not intended to have retroactive application, the First Department certainly would not have reversed itself so expediently.
This finding was despite the First Department's own affirmance of Justice Rosado's dismissal for "failure of plaintiff to litigate its case at trial as scheduled for December 16, 2019" (Onewest Bank, FSB v. Fox, 191 A.D.3d 481 [1st Dept 2021]).
Plaintiff also posits that retroactive application of FAPA is violative of its due process rights under the U.S. Constitution as well as the Takings Clause thereunder. As a rule, "[legislative enactments enjoy a strong presumption of constitutionality . .. [and] parties challenging a duly enacted statute face the initial burden of demonstrating the statute's invalidity 'beyond a reasonable doubt'. Moreover, courts must avoid, if possible, interpreting a presumptively valid statute in a way that will needlessly render it unconstitutional" (LaValle v. Hayden, 98 N.Y.2d 155, 161 [2002] [citations omitted]).
The United States Supreme Court recognized almost 30 years ago that the constitutional impediments to retroactive application of civil legislation are "modest" and that without a violation of an explicit constitutional proclamation "the potential unfairness of retroactive civil legislation is not [in and of itself] a sufficient reason for a court to fail to give a statute its intended scope" (Landgraf, supra at 267 and 272; see also Regina, supra at 365 [Noting the Court of Appeals adoption of the Landgra/analytical framework m American Economy Ins. Co. v. State of New York, 30 N.Y.3d 1 36 [2017J J).
While entitled to the presumption of constitutionality, retroactive legislation must meet a burden not faced by entirely prospective legislation, specifically that the questioned statute is supported by "'a legitimate legislative purpose furthered by rational means'" (American Economy Ins. Co. v. State of New For/q 30 N.Y.3d 136, 157-158 [2017], citing General Motors Corp, v. Romein, 503 U.S. 181, 19111992]). Explained differently, constitutional muster is passed when "the retroactive application of the legislation is itself justified by a rational legislative purpose" (Pension Benefit Guaranty Corporation v. R. A. Gray & Co., 467 U.S. 717, 730 [1984]). When applying this standard, the Court of Appeals has "suggested that, in order to comport with due process, there must be a 'persuasive reason' for the 'potentially harsh' impacts of retroactivity" (Regina, supra at 375). The question presented is one of degree requiring consideration of: [11 the length of the retroactivity period as affecting a party's repose, [2] the forewarning of legislative change relevant to reliance on existing law and [3] the public purpose for the statute (see Replan Dev., Inc. v. Department of Housing Preservation & Dev., 70 N.Y.2d 451, 456 [ 1987J; see also Regina, supra at 376).
In this case, by making FAPA applicable to all unenforced foreclosure actions those where are sale has not occurred-the period of retroactivity could, in many cases, be lengthy. Nevertheless, any claim of reliance on the pronouncements by the Court of Appeals in Engel is unavailing. Prior to that decision, the Court of Appeals "never addressed what constitute[d] a revocation in [the present] context" (Engel, supra at 28). Moreover, the Engel court observed that "no clear rule has emerged with respect to the issue raised here-whether a noteholder's voluntary' motion or stipulation to discontinue a mortgage foreclosure action, which docs not expressly mention de-acccleration or a willingness to accept installment payments, constitutes a sufficiently 'affirmative act.'" (id. at 29). In this case, the voluntary7 discontinuance occurred some eight years before Engel was decided and the written de-acccleration attempted.
Plaintiff s claimed reliance on Engel and other existing law dovetails into the issue of whether forewarning of a change in the law had any impact under the circumstances. The twenty-two-month period between the ruling in Engel (issued February 18, 2021), and the enactment of FAPA (effective December 30, 2022), has been found sufficient in length to support a claim of reliance on Engel (see Matter of Handler, P.C. v. DiNapoli, 23 N.Y.3d 239, 248-250 [2014]). But closer scrutiny reveals that the legislative reaction which resulted in FAPA was more than conceivable. The issuance of the Engel decision was decried by multiple state and local politicians. This included Senator James Sanders who sponsored the original version of FAPA which was introduced less than a month after issuance of the Engel decision. Another bill, which would ultimately replace the far broader Senate version, was introduced in the Assembly not long thereafter. Given this swift reaction by the legislature and considering that the applicable holdings in Engel were questions of first impression before the Court of Appeals which settled an area of the law without clarity, any expected repose by lenders in Engel subsisting indefinitely was not reasonable (see Tegreh Realty Corp, v. Joyce, supra at 100).
see eg https://www.nysenate.gov/newsroom/press-releases/202l/james-sanders/senator-jarnes-sanders-jr-pushes-bill-help-stop-unjust.
S5473 was filed March 8, 2021.
For example the Senate bill included an amendment to CPLR 206 to add a new subdivision [e] that would have set the accrual date of a foreclosure action ot certain mortgage instruments "at the first moment in time where the right to demand immediate payment in fill may be exercised-not when, if ever, the demand is actually made." Also contained in that version was proposal to amend CPLR 3212 to “clarify” that a successive motion for summary judgment is a motion affecting prior order which must be made in accordance with the applicable subdivisions of CPLR. 2221 and 5015.
A7737 was filed May 20, 2021.
The political resolve which gave rise to FAP.A is far from new. The Legislature's statutory forays into the area of foreclosure law, particularly residential foreclosures, has been ubiquitous over the last fifteen years. In that period, and before, multiple perceived ills in the home lending and foreclosure arenas have been addressed with the institution of various procedural and substantive requirements that did not exist at common-law as well as the amendment of existing laws. Further, these novel statutes have been routinely amended when application of these edicts were found ineffective or insufficiently expansive. Legislative enactments have also been accompanied by the adoption of various codes, rules and regulations by both executive agencies and the judiciary. Ongoing uncertainty in foreclosure law has been injected by the judiciary as well. In addition to the titanic shift Engel caused, the Appellate Division, Second Department's decision in Bank of America, N.A. v. Kessler, 202 A.D.3d 10 [2nd Dept. 2021], and its subsequent reversal by the Court of Appeals, also generated a flurry' of litigation machinations. The upshot of all this is that forewarning to the lending industry of the likelihood of change in any portion of this area of law has not been just heralded these many years, but virtually foregone.
Since 2000, the following are some of the New York statutes that have been enacted in response to perceived ills inequities and abuses in the mortgage and foreclosure businesses'- CPLR §§3021 -b and 3408; RPAPL $$1302 1302-a 1303, 1304,1305, 1306, 1307, 1308, 1393; RPL §§265-a, 265-b, 280-b, 280-d; 22 NYCRR §202.12-a. The federal legislative and' regulators, enactments are too legion to recount in this footnote.
Bank of America, NA v. Kessler, 39 N.Y.3d 317 [2023].
The public purpose of FAPA is well documented in the statute's history and the intention of the legislature that it be applied to all existing cases is express. FAPA's purpose is broadly stated as to protect homeowners from "abuses of the judicial foreclosure process" through "an onslaught of successive foreclosure actions that would otherwise be barred by the statute of limitations". To accomplish this aim, the legislature clearly stated its intention to undo judicial pronouncements which permitted lenders to "manipulate the statutes of limitation to their advantage through clarification and restoration of "long standing law". The desire to protect property owners from foreclosure abuses is rationally based on well documented wide-spread misconduct by certain mortgage lenders (see eg Jackie Calmes and Sewell Chan, President Presses Bid To Rein In Loan Abuse, NY Times, Jan. 20, 2010 §B at 1, col 0) as well as entities in the mortgage foreclosure business see eg Barry Meier, A Foreclosure Mess Draws In the Filing Lawyers, Too, NY Times, Oct. 16, 2010 §B at 1, col 1), The Legislature's repeated references to toppling judicial decisions which it views misinterpreted its intent and to codify opinions in accord therewith, evidence that retroactivity was central to the enactment of FAPA (see Regina at 366). Based on the foregoing analysis, the Court determines that, under the circumstances presented, retroactive application of FAPA docs not violate Plaintiffs constitutional due process rights.
Plaintiff also asserts that retroactive enforcement of FAPA would violate the Takings Clause of the Fifth and Fourteenth Amendments to the U.S. Constitution. This right proscribes "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 supra at 266). "The threshold step in any Takings Clause analysis is to determine whether a vested property interest has been identified" (American Economy Ins. Co. v. State of New York, supra at 155). No person has a vested interest or constitutional right in any rule of law entitling them to have the precept remain unaltered (see I. L. F. Y. Co. v. Temporary State Housing Comm., 10 N.Y.2d 263, 270 [1961]; J. B. Preston Co. v Funkhouser, 261 NY 140, 144 [1933]). Similarly, "[p]arties obtain no vested rights in the orders or judgments of courts while they are subject to review" (Boardwalk & Seashore Corp, v. Murdock, 286 NY 494, 498 [1941]). Resultantly, Plaintiff in this case had no vested right in either the "savings statute" or any finding of this Court since no unappealable final judgment has been issued (see U.S. Bank Trust, N.A. v. Miele, __Misc3d __, 2023 NY Slip Op 23186 [Sup Ct West. Cty. 2023]).
Plaintiffs reliance on the Contract Clause of the U.S. Constitution is also unavailing. That part proscribes states from "pass[ing] any . . . [l]aw impairing the [o]bligation of [c]ontracts" (see U.S. Const, art I, § 10 [1]). "The absolute prohibition set forth in the Contract Clause is not to be read literally;, instead, states retain a paramount interest in protecting public welfare through legislation" (Schantz v. O'Sullivan, 11 A.D.3d 22, 24 [3d Dept 2014]). As a result, "the State may impair such contracts by ¶¶ subsequent legislation or regulation so long as it is reasonably necessary to further an important public purpose and the measures taken that impair the contract are reasonable and appropriate to effectuate that purpose" (Crane Neck Ass'n v. New York City/Long Island County Servs. Group, 61 N.Y.2d 154, 167 [1984]). The United States Supreme Court has fashioned a three-part test to discern whether a piece of legislation violates the Contract Clause (see Energy Reserves Group v Kansas Power &Light Co., 459 U.S. 400, 411-412 [1983]). The initial inquiry is "whether the state law has, in fact, operated as a substantial impairment of a contractual relationship" (Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244 [1978]). The extent of the impairment is a factor, but eradication of contractual expectations is not required (id.). Also considered is "whether the industry the complaining party has entered has been regulated in the past" (id.).
In this case, Plaintiff has cited no provision of the note, mortgage or other loan documents that has been impaired. All those documents are silent as to what would constitute a de-acceleration of the indebtedness or any predatory requirements. Notably, no right to unilateral de-acceleration is afforded Plaintiff in the loan documents. Thus, retroactive application of FAPA to this action does not bind the parties to contract terms never bargained for. Any claim of an implied right to unilateral revocation based upon common-law in existence before Engel was decided is unavailing. As noted above, prior to Engel, the Court of Appeals "never addressed" whether a voluntary discontinuance or stipulation which did not mention de-acceleration or readiness to accept installment payments (Engel, supra at 28). Moreover, "no clear rule" existed as to whether this right existed, absent a precise provision in this issue in the operative documents (id. at 29). Lastly, as also recounted supra, the mortgage industry and foreclosure business, particularly in the preceding two decades, has been subject to regular and robust legislative regulation. Therefore, no substantial impairment of Plaintiff s right to contract is demonstrated by retroactive application of FAPA. As the existence of a substantial impairment is a "threshold inquiry", the absence of same obviates any need for an analysis of the remaining two factors (see 19th Street Assoc, v. State, 79 N.Y.2d 434, 442 [1992]).
Based on the foregoing, the amendments instituted in FAPA will be applied in determining Farkas' motion pursuant to CPLR §3211 [a] [5]. On a motion to dismiss a cause of action as barred by the statute of limitations, the movant bears the initial burden of showing prima facie that the time to sue has expired (see Wilmington Sav. Fund Socy, FSB v. Alam, 186 A.D.3d 1464 [2d Dept 2020]; Benn v. Benn, 82 A.D.3d 548 [1st Dept 2011]). To meet its burden, "the Defendant must establish, inter alia, when the Plaintiffs cause of action accrued" (Lebedev v Blavatnik, 144 A.D.3d 24, 28 [1st Dept 2016], quoting Cottons v Selective Surfaces, Inc., 68 A.D.3d 1038, 1041 [2d Dept 2009]). The commencement of the 2008 and 2017 actions were unequivocal acts of acceleration of the debt. Among other things, the complaints expressly stated that Plaintiff was electing to declare the entire principal balance to be due and owing. Based upon the foregoing, Defendant established that the statute of limitations in this matter accrued in 2008 and that more than six-years transpired before this action was commenced. Plaintiffs claim of de-acceleration by voluntary discontinuance of the action in 2013 did not reset the statute of limitations (CPLR §3217[e]; CIT Bank, NA v. Byers, ___A.D.3d ___, 2023 NY Slip Op 04978 [2d Dept 2023]). Likewise, the letter dated December 19, 2014, was also ineffective to constitute de-acceleration (CPLR §203 [h]).
Accordingly, it is
ORDERED that Defendant Judy Farkas' motion for to dismiss the Plaintiffs complaint is granted, and it is
ORDERED that the notice of pendency filed in the New York County Clerk's Office filed against the real property located at 1438 Third Avenue, Unit 28D, New York, New York (Block 1510, Lot 1067) is discharged, and the Clerk shall note same in its records.