Article 13, LLC v. Ponce de Leon Fed. Bank

686 F.Supp.3d 212

ARTICLE 13, LLC, Plaintiff, v. PONCE DE LEON FEDERAL BANK; LaSalle National Bank Association;Alliance Mortgage Banking Corp., and Van Buren Group, Inc., Defendants.

20-CV-03553 (HG) (RML)

United States District Court, E.D. New York

Signed August 11, 2023

Danielle Paula Light, Shauna M. Deluca, Hasbani & Light, P.C., New York, NY, Ilevu Yakubov, Jacobs PC, New York, NY, for Plaintiff.

David Yohay, Windels Marx Lane & Mittendorf, LLP, New York, NY, Kathleen McClure Massimo, Evan N. Soyer, Jordan Wesley Schur, Houser LLP, New York, NY, Ronald James Rodriguez De La Fuente, Rawle & Henderson LLP, Hackensack, NJ, for Defendant LaSalle National Bank Association.

MEMORANDUM & ORDER

HECTOR GONZALEZ, United States District Judge:

Plaintiff Article 13, LLC brings this quiet title action against Defendants LaSalle National Bank Association ("LaSalle"),¹ Central Mortgage Company ("CMC"),² Alliance Mortgage Banking Corp. ("Alliance Mortgage") and Ponce de Leon Federal Bank ("Ponce de Leon") (collectively, "Defendants"), pursuant to 28 U.S.C. § 1332, to cancel a consolidated mortgage loan encumbering a property located at 53 Van Buren Street, Brooklyn, New York (the "Property"). Plaintiff argues that pursuant to Article 15 of the New York Real Property Actions and Proceedings Law ("RPAPL"), the statute of limitations governing Defendants' ability to foreclose on the property expired after Defendant LaSalle's loan servicer, CMC, accelerated the debt by commencing a foreclosure proceeding in 2007 in Kings County Supreme Court (the "Foreclosure Action"). ECF No. 1 ¶¶ 19-22. As a result, Plaintiff alleges that it is entitled to a judgment canceling and discharging the mortgage.

Presently before the Court is Plaintiff's motion for reconsideration of the Court's December 28, 2022, Order denying both Plaintiff's and Defendant LaSalle's motions for summary judgment (the "December 28, 2022, Order"). ECF No. 59. For the reasons set forth below, Plaintiff's motion for reconsideration is granted. Accordingly, Plaintiff's motion for summary judgment on its RPAPL claim is granted, ECF No. 42-1.

BACKGROUND

The Court assumes familiarity with the background of this case and only provides a summary of the pertinent facts and procedural history, see Article 13 LLC v. Ponce de Leon Federal Bank, No. 20-cv-3553, 2022 WL 17977493 (E.D.N.Y. Dec. 28, 2022).

Under New York law, the statute of limitations to commence a foreclosure action is six years from the date of acceleration of the mortgage debt. See CPLR § 213(4). An acceleration event can occur when a creditor commences an action "to recover the entire balance of the [mortgage] debt . . . triggering the six-year statute of limitations . . . ." Freedom Mtge. Corp. v. Engel, 37 N.Y.3d 1, 146 N.Y.S.3d 542, 169 N.E.3d 912, 919 (2021). The parties dispute whether CMC had the authority and/or standing to initiate the Foreclosure Action, and therefore whether the Foreclosure Action constituted an acceleration event. ECF No. 40-1 at 13-14. Defendant LaSalle argued that because CMC lacked authority, the six-year statute of limitations was never triggered and therefore, had not expired. Id.

On December 28, 2022, the Court denied both Plaintiff's and Defendant LaSalle's motions for summary judgment finding that "there is a genuine dispute of material fact about whether CMC was the holder of the Note [at the time it initiated the Foreclosure Action]. In other words, whether CMC was assigned the [mortgage lien on the Property, (the "Senior Mortgage")] and possessed the [consolidated note (the "Note")] at the time of the Foreclosure Action" and thus had standing to initiate the Foreclosure Action.

On January 11, 2023, Plaintiff filed a motion for reconsideration of the Court's December 28, 2022, Order based on an intervening change of controlling law.³ ECF No. 59-1. On February 10, 2023, Defendant LaSalle filed its opposition and on February 17, 2023, Plaintiff filed its reply. ECF Nos. 66, 68.

LEGAL STANDARD

"Rule 54(b) [of the Federal Rules of Civil Procedure] allows for reconsideration of non-final orders in the district court's equitable discretion . . . . [D]ecisions referenced in Rule 54(b) may not usually be changed unless there is an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent a manifest injustice." New Falls Corp., 2020 WL 9211146, at *5.

"The major grounds justifying reconsideration are an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992); see also Mallek v. Allstate Ins. Co., No. 22-86-cv, 2023 WL 3513783, at *2 (2d Cir. May 18, 2023) (confirming that the standard described in Virgin Atlantic Airways continues to apply to motions to reconsider an interlocutory order under Rule 54(b)).⁴ It is within the district court's discretion to decide whether to grant a motion for reconsideration. Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995).

A motion for reconsideration "is to be narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been fully considered by the court" and should not be used as a substitute for appeal. T.Z. v. City of New York, 634 F. Supp. 2d 263, 268 (E.D.N.Y. 2009). Furthermore, "[a] motion for reconsideration is not intended as a vehicle for a party dissatisfied with the Court's ruling to advance new theories that the movant failed to advance in connection with the underlying motion." Wyche v. KM Sys., Inc., No. 19-cv-7202, 2021 WL 1535529, at *1 (E.D.N.Y. Apr. 19, 2021).

DISCUSSION

Plaintiff requests that this Court reconsider its December 28, 2022, Order wherein the Court concluded that there was a genuine dispute of material fact regarding whether CMC was the holder of the Note at the time it initiated the Foreclosure Action. Plaintiff asserts that there has been a change in controlling law since the Court's December 28, 2022, Order because Governor Kathy Hochul signed into effect the New York Foreclosure Abuse Prevention Act (the "FAPA") on December 30, 2022. ECF No. 59-1. Defendant LaSalle contends that: (i) Plaintiff cannot rely on the FAPA as an intervening change of controlling law, and (ii) the FAPA cannot retroactively apply to the Foreclosure Action without violating Defendant's constitutional due process rights. ECF No. 66.

I. The FAPA Is an Intervening Change of Controlling Law

The New York legislature passed the FAPA specifically to "overrule Engel." East Fork Funding, LLC v. U.S. Bank, No. 20-cv-3404, 2023 WL 2660645, at *2 (E.D.N.Y. Mar. 23, 2023). In Engel, the New York Court of Appeals held that lenders could voluntarily revoke acceleration of mortgage debt, and therefore, stop accrual of the six-year statute of limitations by voluntarily discontinuing a foreclosure action within six years from the date of acceleration. See Engel, 169 N.E.3d at 917 ("[W]e hold that where the maturity of the debt has been validly accelerated by commencement of a foreclosure action, the noteholder's voluntary withdrawal of that action revokes the election to accelerate, absent the noteholder's contemporaneous statement to the contrary."). The FAPA overrules Engel and amends New York Civil Practice Law and Rules ("CPLR") § 3217 to provide that a:

voluntary discontinuance of [any action on a mortgage], 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.

FAPA § 8 (codified at CPLR § 3217(e)). In other words, a voluntary discontinuance does not result in a revocation of the acceleration of the mortgage debt and therefore, does not stop accrual of the statute of limitations. The FAPA clarifies that:

Once a cause of action upon [a mortgage] has accrued, no party may, in form or effect, unilaterally waive, postpone, cancel, toll, revive, or reset the accrual thereof, or otherwise purport to [a]ffect a unilateral extension of the limitations period prescribed by law to commence an action and to interpose the claim, unless expressly prescribed by statute.

FAPA § 4 (codified at CPLR § 203(h)). Section 7 of the FAPA also amends CPLR § 213(4), adding, in relevant part, subsection (b):

In any action seeking cancellation and discharge of record of an instrument described under subdivision four of section fifteen hundred one of the real property actions and proceedings law, 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.

FAPA § 7 (codified at CPLR § 213(4)(b)). Finally, Section 10 of the FAPA states that the statute "shall apply to all actions commenced on [a mortgage] in which a final judgment of foreclosure and sale has not been enforced." East Fork Funding, 2023 WL 2660645 at *2.

The Court finds that the FAPA is an intervening change of controlling law because it "might reasonably be expected to alter the conclusion reached by the court." Shrader, 70 F.3d at 257. The FAPA provides that in an action seeking cancellation and discharge of record of a mortgage, a defendant is "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...