Beneficial Homeowner Serv. Corp. v. Thwaits

185 A.D.3d 1126

127 N.Y.S.3d 163

BENEFICIAL HOMEOWNER SERVICE CORPORATION, Appellant,

v.Heirs At Large of Ramona E. THWAITS, Deceased, et al., Respondents, et al., Defendants.

529722

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

Calendar Date: May 19, 2020

Decided and Entered: July 2, 2020

MEMORANDUM AND ORDER

Clark, J.

In 2002, Ramona E. Thwaits (hereinafter decedent) borrowed a sum of money from plaintiff's predecessor in interest and executed a promissory note that was secured by a mortgage on certain real property in the Town of Jay, Essex County. In October 2009, after the mortgage had been assigned to plaintiff and after decedent had allegedly defaulted on the mortgage, plaintiff commenced an action to foreclose on the mortgage. In January 2011, during the pendency of the action, decedent passed away. Approximately 13 months later, without having sought substitution of a legal representative to act on behalf of decedent's estate (see CPLR 1021 ), plaintiff filed a notice with the Essex County Clerk's office to discontinue the action.

In 2013, plaintiff commenced a second mortgage foreclosure action, naming decedent as defendant. However, in March 2015, plaintiff filed a notice with the County Clerk's office, ostensibly discontinuing that action. Thereafter, in July 2015 and September 2015, plaintiff sent notices to decedent at the mortgaged property. In the notices, plaintiff purported to revoke its prior acceleration of the mortgage, de-accelerate the mortgage and reinstitute the loan as an installment loan.

In June 2016, plaintiff sent another notice to decedent at the mortgaged property. The notice, which was ultimately returned as undeliverable, stated that decedent was in default on her mortgage loan and that, if she did not pay the entire amount due and owing on the mortgage within 90 days, it "may commence legal action against" her. Thereafter, in November 2016, plaintiff commenced the instant mortgage foreclosure action, this time naming certain known heirs of decedent, as well as, among others, decedent's "heirs at large." The named defendants did not file an answer or otherwise appear in the action. Supreme Court subsequently appointed a guardian ad litem (hereinafter GAL) to represent decedent's unknown successors in interest. The GAL filed an answer on their behalf, asserting that the mortgage foreclosure action was barred by the statute of limitations.

In March 2018, plaintiff moved for, among other things, summary judgment foreclosing on the mortgage. The GAL opposed the motion on behalf of his clients and requested that Supreme Court "review the whole record and grant [s]ummary [j]udgment dismissing th[e action] as ... time barred." Supreme Court determined that plaintiff had established its prima facie entitlement to summary judgment by proffering evidence of, among other things, its possession of the note and decedent's default on the mortgage. However, upon searching the record, Supreme Court found that the GAL had rebutted plaintiff's showing and established entitlement to summary judgment dismissing the complaint as untimely. Consequently, Supreme Court, among other things, granted defendants summary judgment dismissing the complaint. Plaintiff appeals, and we affirm.

"The six-year statute of limitations in a mortgage foreclosure action begins to run from the due date for each unpaid installment unless the debt has been accelerated; once the debt has been accelerated by a demand or commencement of an action, the entire sum becomes due and the statute of limitations begins to run on the entire mortgage" ( Lavin v. Elmakiss , 302 A.D.2d 638, 639, 754 N.Y.S.2d 741 [2003], lv dismissed 100 N.Y.2d 577, 764 N.Y.S.2d 386, 796 N.E.2d 478 [2003], lv denied 2 N.Y.3d 703, 778 N.Y.S.2d 462, 810 N.E.2d 915 [2004] [citations omitted]; see CPLR 213[4] ; Bank of Am., N.A. v. Luma , 157 A.D.3d 1106, 1106–1107, 69 N.Y.S.3d 170 [2018] ). After a lender elects to accelerate a mortgage debt, such election can "be revoked only through an affirmative act occurring within the statute of limitations period" ( Lavin v. Elmakiss , 302 A.D.2d at 639, 754 N.Y.S.2d 741 ; see Specialized Loan Servicing Inc. v. Nimec , 183 A.D.3d 962, 964, 123 N.Y.S.3d 713 [2020] ). To be valid and enforceable, de-acceleration notices, like acceleration notices, must be clear and unambiguous (see U.S. Bank N.A. v. Creative Encounters LLC , 183 A.D.3d 1086, 1087, 124 N.Y.S.3d 92 [2020] ; Wells Fargo Bank, N.A. v. Portu , 179 A.D.3d 1204, 1207, 116 N.Y.S.3d 761 [2020] ; Milone v. U.S. Bank N.A. , 164 A.D.3d 145, 153, 83 N.Y.S.3d 524 [2018], lv dismissed 34 N.Y.3d 1009, 115 N.Y.S.3d 205, 138 N.E.3d 1088 [2019] ).

It is clear that plaintiff's commencement of the October 2009 action accelerated the debt, thereby starting the six-year statute of limitations period, and that the instant action was commenced more than six years later in November 2016. Plaintiff, however, maintains that this action is timely because, after accelerating the debt in October 2009, it engaged in several affirmative acts that de-accelerated the debt – namely, filing notices to discontinue the 2009 action and the 2013 action and sending de-acceleration notices to decedent at the mortgaged property in July 2015 and September 2015. We are not persuaded.

With respect to the notices of discontinuance in the 2009 and 2013 actions, we note that we, as well as other Appellate Divisions, have held that the voluntary discontinuance of an action, without more, will not generally constitute an affirmative act that revokes a lender's election to accelerate a debt (see U.S. Bank N.A. v. Creative Encounters LLC , 183 A.D.3d at 1088, 124 N.Y.S.3d 92 ; Specialized Loan Servicing Inc. v. Nimec , 183 A.D.3d at 964, 123 N.Y.S.3d 713 ; Wells Fargo Bank, N.A. v. Liburd , 176 A.D.3d 464, 464–465, 107 N.Y.S.3d 858 [1st Dept. 2019] ; Ditech Fin., LLC v. Naidu , 175 A.D.3d 1387, 1389–1390, 109 N.Y.S.3d 196 [2d Dept. 2019], lv granted 34 N.Y.3d 910, 2020 WL 769004 [2020] ). Regardless, even if the notices of voluntary discontinuance constituted affirmative acts revoking the 2009 debt acceleration, we would find that the particular circumstances of this case would render any such revocation ineffectual.

Generally, the death of a party stays all proceedings pending substitution of a legal representative for the decedent (see Adamec v. Mueller , 94 A.D.3d 1212, 1213 n 2, 942 N.Y.S.2d 258 [2012], lv denied 20 N.Y.3d 856, 2013 WL 105330 [2013] ; Griffin v. Manning, 36 A.D.3d 530, 532, 828 N.Y.S.2d 372 [2007] ; Anderson v. Gilliland , 245 A.D.2d 654, 655, 665 N.Y.S.2d 126 [1997] ; but see e.g. U.S. Bank N.A. v. Esses , 132 A.D.3d 847, 847–848, 18 N.Y.S.3d 672 [2015] ). In the 2009 action, plaintiff filed its notice of voluntary discontinuance roughly 13 months after decedent had passed away, without having sought substitution of a legal representative to act on behalf of decedent's estate (see CPLR 1021 ; see also SCPA 1002, 1401, 1402[1][b] ). Thus, as the action was stayed and there was no substitution of a proper defendant, the notice of voluntary discontinuance filed in the 2009 action was without effect.¹ As for the notice of discontinuance filed in the 2013 action, plaintiff commenced that action against decedent, despite the fact that she had died more than two years earlier. As a result, the 2013 action was a nullity from its inception and the subsequent notice of voluntary discontinuance was void (see Wells Fargo Bank, N.A. v. Baymack , 176 A.D.3d 905, 906, 107 N.Y.S.3d 870 [2019] ; Deutsche Bank Natl. Trust Co. v. Faden , 172 A.D.3d 817, 818, 97 N.Y.S.3d 882 [2019] ; Anderson v. Gilliland , 245 A.D.2d at 655, 665 N.Y.S.2d 126 ).

We similarly find that, under the circumstances of this case, the July 2015 and September 2015 notices did not constitute affirmative acts that would notify decedent's legal representative that the prior debt acceleration was revoked, that the debt was de-accelerated and that the loan was reinstated to installment payments. Irrespective of the content and substance of the July 2015 and September 2015 notices, plaintiff addressed the notices to decedent, who had been deceased for more than four years, and mailed them to the mortgaged property. The record reflects that the September 2015 letter, which was sent by both regular mail and certified mail, was returned as undeliverable.² Thus, even if the notices clearly and unambiguously expressed plaintiff's intent to revoke the October 2009 debt acceleration and reinstate installment payments, the manner and method in which plaintiff sent the notices and to whom did not effectuate that intent (compare U.S. Bank Trust, N.A. v. Rudick , 172 A.D.3d 1430, 1431, 102 N.Y.S.3d 66 [2019] ). In view of the foregoing, we agree with Supreme Court that plaintiff did not engage in an affirmative act that had the effect of de-accelerating the debt (see U.S. Bank N.A. v. Creative Encounters LLC , 183 A.D.3d at 1088–1089, 124 N.Y.S.3d 92 ). Accordingly, as plaintiff commenced this action after the statute of limitations period had expired, Supreme Court correctly determined that this action was time-barred (see CPLR 213[4] ; Specialized Loan Servicing Inc. v. Nimec , 183 A.D.3d at 964, 123 N.Y.S.3d 713 ).

Finally, although the named defendants did not appear in the action, we discern no error in Supreme Court's dismissal of the complaint in its entirety, given that the mortgaged property may be an estate asset that is potentially subject to distribution among decedent's successors in interest (see CPLR 3212[b] ). Additionally, plaintiff had notice of the statute of limitations issue and a full opportunity to oppose its application (compare ...