Bank of N.Y. Mellon v. Dieudonne

171 A.D.3d 34

96 N.Y.S.3d 354

BANK OF NEW YORK MELLON, etc., Appellant,

v.Alice J. DIEUDONNE, Respondent, et al., Defendants.

2017–08956

Index No. 518577/16

Supreme Court, Appellate Division, Second Department, New York.

Argued—January 15, 2019

Decided March 13, 2019

Frenkel, Lambert, Weiss, Weisman & Gordon, LLP, Bayshore, N.Y. (Keith L. Abramson of counsel), for appellant.

Andrea S. Gross (Cardenas Islam & Associates, PLLC, Jamaica, N.Y. [Barak P. Cardenas ], of counsel), for respondent.

MARK C. DILLON, J.P., LEONARD B. AUSTIN, ROBERT J. MILLER, COLLEEN D. DUFFY, JJ.

OPINION & ORDER

MILLER, J.

This appeal presents an issue of first impression for this Court. The plaintiff in this mortgage foreclosure action contends that it lacked the authority to exercise its contractual option to accelerate the maturity of the entire balance of the loan it seeks to recover. The plaintiff argues that it was prevented from validly accelerating the debt by virtue of a reinstatement provision in the subject mortgage which gives the borrower the option, under certain circumstances, to effectively de-accelerate the maturity of the debt. The plaintiff further argues that the statute of limitations did not begin to run until the borrower's rights under the reinstatement provision in the subject mortgage were extinguished.

The mortgage at issue is a uniform instrument issued by Fannie Mae and Freddie Mac for use in New York. Given the prevalence of the language used in this uniform instrument, and in light of the divergent conclusions reached in the trial-level decisions interpreting that language, we deem it appropriate to clarify the legal principles that are relevant to this issue and to set forth the appropriate construction of the language used in these uniform instruments. Ultimately, we conclude that the reinstatement provision contained in the subject mortgage was not a condition precedent to the acceleration of the mortgage and did not prevent the plaintiff from validly exercising its option to accelerate. Accordingly, the statute of limitations started to run when the plaintiff exercised its option to accelerate.

In October 2016, the plaintiff commenced this action to foreclose a mortgage against, among others, the defendant Alice J. Dieudonne (hereinafter the defendant). The defendant moved pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against her as time-barred. The defendant argued that the entire debt was accelerated in June 2010, when a prior action was commenced to foreclose the same mortgage. The Supreme Court granted the defendant's motion, and the plaintiff appeals.

"A defendant who seeks dismissal of a complaint pursuant to CPLR 3211(a)(5) on the ground that it is barred by the statute of limitations bears the initial burden of proving, prima facie, that the time in which to commence an action has expired" ( Texeria v. BAB Nuclear Radiology, P.C., 43 A.D.3d 403, 405, 840 N.Y.S.2d 417 ; see Minskoff Grant Realty & Mgt. Corp. v. 211 Mgr. Corp., 71 A.D.3d 843, 845, 897 N.Y.S.2d 485 ; 6D Farm Corp. v. Carr, 63 A.D.3d 903, 905–906, 882 N.Y.S.2d 198 ). "The time within which an action must be commenced, except as otherwise expressly prescribed, shall be computed from the time the cause of action accrued to the time the claim is interposed" ( CPLR 203[a] ). Accordingly, "[t]o meet [his or her] burden, a defendant must establish when the causes of action accrued" ( Philip F. v. Roman Catholic Diocese of Las Vegas, 70 A.D.3d 765, 766, 894 N.Y.S.2d 125 ; see Swift v. New York Med. Coll., 25 A.D.3d 686, 687, 808 N.Y.S.2d 731 ).

Generally, "[a] cause of action does not accrue until its enforcement becomes possible" ( Jacobus v. Colgate, 217 N.Y. 235, 245, 111 N.E. 837 ), which occurs "as soon as a claimant is able to state the elements of that cause of action, and hence, to assert a valid right to some sort of legal relief" ( Roldan v. Allstate Ins. Co., 149 A.D.2d 20, 26, 544 N.Y.S.2d 359 ; see New York City Tr. Auth. v. Morris J. Eisen, P.C., 276 A.D.2d 78, 85, 715 N.Y.S.2d 232 ). "Where, as here, the claim is for payment of a sum of money allegedly owed pursuant to a contract, the cause of action accrues when the plaintiff possesses a legal right to demand payment" ( Swift v. New York Med. Coll., 25 A.D.3d at 687, 808 N.Y.S.2d 731 [internal quotation marks omitted]; see Minskoff Grant Realty & Mgt. Corp. v. 211 Mgr. Corp., 71 A.D.3d at 845, 897 N.Y.S.2d 485 ; Kuo v. Wall St. Mtge. Bankers, Ltd., 65 A.D.3d 1089, 1090, 885 N.Y.S.2d 520 ).

"As a general matter, an action to foreclose a mortgage may be brought to recover unpaid sums which were due within the six-year period immediately preceding ... the action" ( Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d 980, 982, 943 N.Y.S.2d 540 ; see CPLR 213[4] ). "With respect to a mortgage 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" ( Nationstar Mtge., LLC v. Weisblum, 143 A.D.3d 866, 867, 39 N.Y.S.3d 491 ; see Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d at 982, 943 N.Y.S.2d 540 ; Wells Fargo Bank, N.A. v. Cohen, 80 A.D.3d 753, 754, 915 N.Y.S.2d 569 ; Loiacono v. Goldberg, 240 A.D.2d 476, 477, 658 N.Y.S.2d 138 ).

However, even if a mortgage is payable in installments, the terms of the mortgage may contain an acceleration clause that gives the lender "the option to demand due the entire balance of principal and interest upon the occurrence of certain events delineated in the mortgage" (1 Bergman on New York Mortgage Foreclosures § 4.02; see Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d at 982–983, 943 N.Y.S.2d 540 ). Where the terms of the mortgage provide that "the acceleration of the maturity of a mortgage debt on default is made optional with the holder of the note and mortgage, some affirmative action must be taken evidencing the holder's election to take advantage of the accelerating provision, and until such action has been taken the provision has no operation" ( Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d at 982–983, 943 N.Y.S.2d 540 ; see Esther M. Mertz Trust v. Fox Meadow Partners, 288 A.D.2d 338, 340, 734 N.Y.S.2d 77 ; Ward v. Walkley, 143 A.D.2d 415, 417, 532 N.Y.S.2d 426 ; see also 1 Bergman on New York Mortgage Foreclosures §§ 4.05, 5.11[2]; cf. Phoenix Acquisition Corp. v. Campcore, Inc., 81 N.Y.2d 138, 142–144, 596 N.Y.S.2d 752, 612 N.E.2d 1219 ). Once a mortgage has been validly accelerated in accordance with the terms of the mortgage, "the entire amount is due and the Statute of Limitations begins to run on the entire debt" ( EMC Mtge. Corp. v. Patella, 279 A.D.2d 604, 605, 720 N.Y.S.2d 161 ; see Nationstar Mtge., LLC v. Weisblum, 143 A.D.3d at 867, 39 N.Y.S.3d 491 ; Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d at 982, 943 N.Y.S.2d 540 ; Loiacono v. Goldberg, 240 A.D.2d at 477, 658 N.Y.S.2d 138 ).

A borrower generally must be provided with notice of the lender's decision to exercise an option to accelerate the maturity of a loan (see EMC Mtge. Corp. v. Smith, 18 A.D.3d 602, 603, 796 N.Y.S.2d 364 ; Arbisser v. Gelbelman, 286 A.D.2d 693, 694, 730 N.Y.S.2d 157 ; EMC Mtge. Corp. v. Patella, 279 A.D.2d at 605–606, 720 N.Y.S.2d 161 ), and such notice must be "clear and unequivocal" ( Sarva v. Chakravorty, 34 A.D.3d 438, 439, 826 N.Y.S.2d 74 ; see Arbisser v. Gelbelman, 286 A.D.2d at 694, 730 N.Y.S.2d 157 ; Colonie Block & Supply Co. v. Overmyer Co., 35 A.D.2d 897, 897, 315 N.Y.S.2d 713 ). "Commencement of a foreclosure action may be sufficient to put the borrower on notice that the option to accelerate the debt has been exercised" ( Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d at 983, 943 N.Y.S.2d 540 ; see EMC Mtge. Corp. v. Smith, 18 A.D.3d at 603, 796 N.Y.S.2d 364 ; Clayton Natl. v. Guldi, 307 A.D.2d 982, 982, 763 N.Y.S.2d 493 ; Arbisser v. Gelbelman, 286 A.D.2d at 694, 730 N.Y.S.2d 157 ).

Here, in support of her motion, the defendant demonstrated that the subject mortgage provided the plaintiff with the right to require the defendant to immediately pay "the entire amount then remaining unpaid under the Note and [mortgage]" if the plaintiff first satisfied certain conditions set forth in the mortgage. The defendant's evidentiary submissions established that the plaintiff complied with those conditions (cf. Serapilio v. Staszak, 255 A.D.2d 824, 824, 680 N.Y.S.2d 296 ), and then validly exercised its option to accelerate the entire remaining balance due under the note by filing the summons and complaint in the first foreclosure action in June 2010 (see Albertina Realty Co. v. Rosbro Realty Corp., 258 N.Y. 472, 476, 180 N.E. 176 ; Milone v. U.S. Bank N.A., 164 A.D.3d 145, 152–153, 83 N.Y.S.3d 524 ; Deutsche Bank Natl. Trust Co. v. Adrian, 157 A.D.3d 934, 935, 69 N.Y.S.3d 706 ; Beneficial Homeowner Serv. Corp. v. Tovar, 150 A.D.3d 657, 658, 55 N.Y.S.3d 59 ). Accordingly, since this action was not commenced until October 2016, the defendant established, prima facie, that the time in which to commence this action has expired (see CPLR 213[4] ).

Where, as here, a defendant satisfies the initial burden of proof on a motion pursuant to CPLR 3211(a)(5), "the burden shifts to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or otherwise inapplicable, or whether the plaintiff actually commenced the action within the applicable limitations period" ( Barry v. Cadman Towers, Inc., 136 A.D.3d 951, 952, 25 N.Y.S.3d 342 ; see Stewart v. GDC Tower at Greystone, 138 A.D.3d 729, 730, 30 N.Y.S.3d 638 ). Here, in opposition to the defendant's prima facie showing, the plaintiff failed to raise a question of fact.

Contrary to the plaintiff's contention, the reinstatement provision in paragraph 19 of the mortgage did not prevent it from validly accelerating the mortgage debt. That provision effectively gives the borrower the contractual option to de-accelerate the mortgage when certain conditions are met....