1042 II Realty, Inc. v. PHH Mortg. Corp.

582 F.Supp.3d 142

1042 II REALTY, INC., Plaintiff,

v.PHH MORTGAGE CORPORATION, Defendant.

21-CV-2761 (VEC)

United States District Court, S.D. New York.

Signed January 31, 2022

Zvi Aryeh Storch, Storch Law, P.C., Brooklyn, NY, Avinoam Y. Rosenfeld, Avinoam Y. Rosenfeld Attorney at Law, Lawrence, NY, for Plaintiff.

Jacqueline Marie Aiello, Stradley Ronon Stevens & Young, LLP, New York, NY, for Defendant.

OPINION & ORDER

VALERIE CAPRONI, United States District Judge:

Plaintiff 1042 II Realty, Inc. brought a quiet title action against Defendant PHH Mortgage Corporation¹ pursuant to § 1501(4) of the N.Y. Real Property and Proceedings Law, seeking to extinguish a mortgage attached to a property in the Bronx. Defendant moved to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, and Plaintiff cross-moved for summary judgment pursuant to Rule 56 of the Federal Rules. For the following reasons, Defendant's motion is DENIED, and Plaintiff's cross-motion is GRANTED.

BACKGROUND

On April 17, 2008, Candido Rodriguez obtained a loan in the amount of $526,500 secured by a mortgage on property located at 1042 College Avenue, Bronx, New York. See Compl., Dkt. 1-2 ¶¶ 4, 6, 7; Def. Resp. 56.1 Stmt., Dkt. 21 ¶ 1. Approximately one year later, the loan was assigned to IndyMac Federal Bank FSB ("IndyMac"). Def. Resp. 56.1 Stmt. ¶ 4. On May 8, 2009, IndyMac filed a foreclosure action in the Bronx County Supreme Court. Id. ¶ 5. In that action, IndyMac alleged that Rodriguez had defaulted on the loan by failing to pay the monthly installments as required. See Bronx County Compl., Dkt. 17-3 ¶ 8. IndyMac further claimed that, in accordance with the terms of the note and the mortgage, it was electing to declare the entire principal loan balance, in the amount of $524,617.86, "to be due and owing." Id. ¶¶ 9–10.

Plaintiff purchased the property from Rodriguez several years later.² On December 22, 2015, more than six years after IndyMac filed the foreclosure action, IndyMac's successor moved to discontinue that action. Def. Resp. 56.1 Stmt. ¶ 7; Mot. to Discontinue, Dkt. 6-3 at 1–2. The following month, on January 27, 2016, the deed for the property was recorded in Plaintiff's name. Compl. ¶ 4; Search Results, Dkt. 17-2 at 1. On June 6, 2016, the motion to discontinue that had been filed six months earlier was granted, and the foreclosure action was closed. Def. Resp. 56.1 Stmt. ¶ 11; Bronx County Supreme Court Order, Dkt. 6-4. The loan was subsequently assigned to Ocwen Loan Servicing, LLC, see Def. Resp. 56.1 Stmt. ¶ 13; Search Results at 1, which later merged and became the Defendant, PHH Mortgage Corporation, see Not. of Removal, Dkt. 1 at 1 n.1.

On January 13, 2021, Plaintiff sued Defendant in Bronx County Supreme Court to quiet title on the property, seeking a judgment against Defendant extinguishing the mortgage pursuant to § 1501(4) of the N.Y. Real Property and Proceedings Law. See Compl., Dkt. 1-2. Defendant timely removed the action to federal court, see Not. of Removal, Dkt. 1, and moved to dismiss for failure to state a claim, see Not. of Mot., Dkt. 5. Plaintiff opposed the motion and cross-moved for summary judgment. See Not. of Mot., Dkt. 16; Mem. of Law, Dkt. 17. Defendant opposed Plaintiff's cross-motion. Mem. of Law, Dkt. 20.

LEGAL STANDARD

For Plaintiff to survive Defendant's motion to dismiss under Rule 12(b)(6), its "complaint must allege sufficient facts, taken as true, to state a plausible claim for relief." Johnson v. Priceline.com, Inc. , 711 F.3d 271, 275 (2d Cir. 2013) (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible when the factual content pleaded allows a court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). When considering a Rule 12(b)(6) motion to dismiss, the Court draws all reasonable inferences in the light most favorable to the plaintiff. See Gibbons v. Malone , 703 F.3d 595, 599 (2d Cir. 2013) (citation omitted). But even though courts are required to accept all of the factual allegations in the complaint as true, courts " ‘are not bound to accept as true a legal conclusion couched as a factual allegation,’ " Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

With respect to Plaintiff's cross-motion for summary judgment, summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Scott v. Harris , 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (cleaned up)). The Court must "construe the facts in the light most favorable to the non-moving party and resolve all ambiguities and draw all reasonable inferences against the movant." Delaney v. Bank of Am. Corp. , 766 F.3d 163, 167 (2d Cir. 2014) (per curiam) (cleaned up) (quoting Aulicino v. N.Y.C. Dep't of Homeless Servs. , 580 F.3d 73, 79–80 (2d Cir. 2009) ).

DISCUSSION

Plaintiff brings its action to quiet title pursuant to § 1501(4) of the N.Y. Real Property and Proceedings Law. That statute provides, in relevant part:

Where the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage ... has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action against any other person or persons ... to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom; provided, however, that no such action shall be maintainable in any case where the mortgagee ... or the successor of [the mortgagee] shall be in possession of the affected real property at the time of the commencement of the action.

N.Y. RPAPL § 1501(4). The parties agree that the only dispute in this lawsuit is whether the applicable statute of limitations on foreclosure has expired. See Mem. of Law, Dkt. 6 at 1; Mem. of Law, Dkt. 17 at 1. In New York, the statute of limitations for breach of a note secured by a mortgage is six years. N.Y. CPLR § 213(4).

I. The Statute of Limitations Trigger

For a mortgage loan payable in installments, "separate causes of action accrue[ ] for each installment that is not paid, and the statute of limitations begins to run[ ] on the date each installment becomes due." Wells Fargo Bank, N.A. v. Burke , 94 A.D.3d 980, 982, 943 N.Y.S.2d 540 (2012). "The law is well settled that, even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt." Ditmid Holdings, LLC v. JPMorgan Chase Bank, N.A. , 180 A.D.3d 1002, 1003, 120 N.Y.S.3d 393 (2020) ; see also Freedom Mortg. Corp. v. Engel , 37 N.Y.3d 1, 21, 146 N.Y.S.3d 542, 169 N.E.3d 912 (2021) reargument denied , 37 N.Y.3d 926, 146 N.Y.S.3d 865, 169 N.E.3d 1229 (2021) ("[A] cause of action to recover the entire balance of the debt accrues at the time the loan is accelerated, triggering the six-year statute of limitations to commence a foreclosure action." (collecting cases)). "Acceleration is therefore a significant event for statute of limitations purposes ...." Engel , 37 N.Y.3d at 22, 146 N.Y.S.3d 542, 169 N.E.3d 912.

The New York Court of Appeals has "made clear that any election to accelerate must be made in accordance with the terms of the note and mortgage and that the parties are free to include provisions detailing what the noteholder must do to accelerate the debt." Id. (citing Albertina Realty Co. v. Rosbro Realty Corp. , 258 N.Y. 472, 475–76, 180 N.E. 176 (1932) ). "[T]o be valid, an election to accelerate must be made by an ‘unequivocal overt act’ that discloses the noteholder's choice, such as the filing of a verified complaint seeking foreclosure and containing a sworn statement that the noteholder is demanding repayment of the entire outstanding debt." Id. (citing Albertina , 258 N.Y. at 476, 180 N.E. 176 ).

Plaintiff contends that the mortgage debt in this case was accelerated on May 8, 2009, when IndyMac, the owner of the mortgage loan at the time, filed a foreclosure action against Rodriguez, the owner of the property at the time. Mem. of Law, Dkt. 17 at 1. The Court agrees. Defendant asserts, half-heartedly, that the mortgage debt was never accelerated. Defendant first argues that the loan was not accelerated because IndyMac failed to comply with the applicable pre-acceleration requirements; specifically, Defendant asserts that IndyMac did not mail the notice of default to Rodriguez. Mem. of Law, Dkt. 6 at 7.³ In its response, Plaintiff provided a copy of the notices sent by IndyMac to Rodriguez as well as copies of two declarations filed by Defendant's predecessor in the foreclosure action in which the predecessor stated that notices of default had been mailed to Rodriguez. See Mem. of Law, Dkt. 17 at 6–8 (referencing Notices, Dkt. 17-1; Yanez Decl., Dkt. 17-5 ¶¶ 6–7; Brennan Decl., Dkt. 17-6 ¶¶ 3–4).

Defendant does not address directly Plaintiff's argument. Instead, Defendant metaphorically stomps its foot and asserts simply that it continues to "dispute[ ] that the Foreclosure Action accelerated the Mortgage debt ...." Mem. of Law, Dkt. 20 at 1. With little to go on, the Court concludes that Defendant has abandoned its argument that the mortgage debt was not accelerated because its...