Christiana Trust v. Barua

184 A.D.3d 140

125 N.Y.S.3d 420

CHRISTIANA TRUST, etc., Respondent,

v.Himon BARUA, Appellant, et al., Defendants.

2017–12206

Index No. 611910/15

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

Argued—May 21, 2019

June 3, 2020

OPINION & ORDER

DILLON, J.

This is an appeal that involves the commencement of a mortgage foreclosure action that accelerated the full balance of the debt, the discontinuance of that action, the later commencement of a second action on the same note, and the statute of limitations. For reasons set forth below, we hold that the second action was time-barred, as it was commenced beyond the applicable six-year statute of limitations of CPLR 213(4). We also address whether the mere discontinuance of an action, in and of itself, nullifies any debt acceleration demanded in a foreclosure plaintiff's complaint, absent other communication to the borrower that de-acceleration is also intended by the discontinuance.

I. Relevant Facts

On July 25, 2006, the defendant Himon Barua (hereinafter the defendant) executed a note in the sum of $312,000 in favor of JPMorgan Chase Bank, N.A. (hereinafter Chase). The note was secured by a residential mortgage executed by both the defendant and the defendant Emon Barua encumbering certain real property located in Brentwood (hereinafter the subject property). The defendant allegedly defaulted in his monthly payment obligations on the note beginning on April 1, 2009.

On November 6, 2009, Chase commenced a mortgage foreclosure action against the defendant and others by the filing of a summons and complaint in the Supreme Court (hereinafter the first action). Chase alleged in paragraph 9 of the complaint that the named defendants defaulted on their payment obligations under the note and mortgage by failing to make the payment that had become due on April 1, 2009. In paragraph 11 of the complaint, it was alleged that Chase "elected and does hereby elect to declare the entire principal balance [of the note] to be due and owing." Later, according to an eCourts printout contained in the record, Chase moved to discontinue the first action, and the motion was granted in an order dated October 15, 2013.

In a summons with notice and complaint filed on November 10, 2015, Christiana Trust, a Division of Wilmington Savings Fund Society, FSB, as trustee for Normandy Mortgage Loan Trust, Series 2013–18 (hereinafter the plaintiff), commenced an action against the defendant and others to foreclose the mortgage on the subject property (hereinafter the second action). The plaintiff alleged that it was the holder of the note and the assignee of the mortgage, and that the defendant was in default of his payment obligations. Paragraph III(E) of the complaint alleged that the plaintiff "elected to and hereby accelerate[s] the mortgage and declare[s] the entire mortgage indebtedness immediately due and payable."

On March 10, 2016, the defendant moved pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against him on the ground that the second action was time-barred and to cancel a lis pendens that had been filed against the subject property. The defendant argued that since the first action was commenced on November 6, 2009, and accelerated the full amount due on the note at that time, the second action, commenced on November 10, 2015, was commenced beyond the six-year statute of limitations of CPLR 213(4) and was therefore untimely. In opposition, the plaintiff argued, inter alia, that the discontinuance of the first action without prejudice, which occurred within six years of that action's acceleration of the full balance due on the note, operated as a de-acceleration of the debt. The plaintiff further argued that the discontinuance of the first action "leaves the situation as if the action had never been filed" (internal quotation marks omitted), in effect erasing the acceleration of the debt which occurred when the first action was commenced on November 6, 2009. The plaintiff concluded that the commencement of the second action on November 10, 2015, constituted a new acceleration rendering the second action timely.

In the order appealed from, dated September 7, 2017, the Supreme Court, inter alia, denied the defendant's motion. The court agreed with the plaintiff that when the first action was discontinued, everything that had occurred within that action, including Chase's acceleration of the loan debt, was annulled. The court concluded that since the first action had been voluntarily discontinued by Chase, that affirmative act revoked the 2009 acceleration of the debt, and the debt acceleration of the second action in 2015 was therefore timely.

For the reasons we discuss below, we reverse the order insofar as appealed from.

II. The Effect of De-acceleration Upon the Statute of Limitations

The parties do not dispute that the controlling statute of limitations for breach of contract actions is six years (see CPLR 213[4] ; Milone v. U.S. Bank N.A., 164 A.D.3d 145, 151, 83 N.Y.S.3d 524 ; Wells Fargo Bank, N.A. v. Eitani, 148 A.D.3d 193, 197, 47 N.Y.S.3d 80 ; Kashipour v. Wilmington Sav. Fund Socy., FSB, 144 A.D.3d 985, 986, 41 N.Y.S.3d 738 ), and that the first action had the stated effect of accelerating the balance of the debt owed on the defendant's note, which triggered the limitations period (see Kashipour v. Wilmington Sav. Fund Socy., FSB, 144 A.D.3d at 986, 41 N.Y.S.3d 738 ; EMC Mtge. Corp. v. Patella, 279 A.D.2d 604, 605, 720 N.Y.S.2d 161 ). The plaintiff and the defendant differ about whether the 2009 debt acceleration was thereafter extinguished by the affirmative discontinuance of the first action on October 15, 2013.

Two years ago, this Court addressed similar issues in Milone v. U.S. Bank N.A. , 164 A.D.3d 145, 83 N.Y.S.3d 524. In Milone, a lender commenced an action to foreclose a mortgage upon residential property on January 13, 2009, as a result of the borrower's default in making monthly installment payments on the note. The acceleration of the full mortgage debt in that action had the effect of commencing the six-year statute of limitations set forth in CPLR 213(4). In an order of the Supreme Court dated February 29, 2012, the action was dismissed after more than three years had run against the statute of limitations. On October 21, 2014, approximately three months before the statute of limitations was to expire, the lender's servicer transmitted a letter to the borrower advising that the note, which had previously been accelerated, was de-accelerated, that any prior demand for full payment on the note was withdrawn, and that the debt was reinstituted as an installment loan (see Milone v. U.S. Bank N.A., 164 A.D.3d at 149, 83 N.Y.S.3d 524 ).

On March 10, 2015, after the six-year statute of limitations had expired as measured from the initial debt acceleration, the borrower in Milone commenced an action pursuant to RPAPL 1501 to cancel and discharge the mortgage and note, arguing that no new foreclosure action had been commenced on the note within six years from its acceleration. The lender moved to dismiss the complaint in the RPAPL 1501 action on the ground that since a de-acceleration of the loan balance had occurred within six years of the acceleration, there was no violation of the statute of limitations and a new six-year limitations period would only begin to run if the full balance of the same note were to be accelerated at some time in the future (see Milone v. U.S. Bank N.A., 164 A.D.3d at 149–150, 83 N.Y.S.3d 524 ). The borrower cross-moved for summary judgment on the complaint. The Supreme Court granted the lender's motion to dismiss the complaint with prejudice and denied the borrower's cross motion for summary judgment on the complaint. On appeal, this Court modified the order, concluding that the Supreme Court should have denied the lender's motion to dismiss the complaint because there was a question of fact as to the lender's standing to de-accelerate the loan debt.

This Court used the occasion in Milone to sort out the law and procedures governing the acceleration and de-acceleration of notes. We recognized well-established precedent that lenders may revoke the acceleration of full mortgage loan balances, so long as the revocation is accomplished by an affirmative act occurring within six years of the earlier acceleration (see id. at 154, 83 N.Y.S.3d 524, citing Deutsche Bank Natl. Trust Co. v. Adrian, 157 A.D.3d 934, 935, 69 N.Y.S.3d 706, MSMJ Realty, LLC v. DLJ Mtge. Capital, Inc., 157 A.D.3d 885, 887, 69 N.Y.S.3d 870, NMNT Realty Corp. v. Knoxville 2012 Trust, 151 A.D.3d 1068, 1069–1070, 58 N.Y.S.3d 118, U.S. Bank N.A. v. Barnett, 151 A.D.3d 791, 793, 56 N.Y.S.3d 255, Kashipour v. Wilmington Sav. Fund Socy., FSB, 144 A.D.3d at 987, 41 N.Y.S.3d 738, UMLIC VP, LLC v. Mellace, 19 A.D.3d 684, 799 N.Y.S.2d 61, Clayton Natl. v. Guldi, 307 A.D.2d 982, 763 N.Y.S.2d 493, and EMC Mtge. Corp. v. Patella, 279 A.D.2d at 606, 720 N.Y.S.2d 161 ; see also HSBC Bank USA, N.A. v. Gold, 171 A.D.3d 1029, 1030, 98 N.Y.S.3d 293 ; Freedom Mtge. Corp. v. Engel, 163 A.D.3d 631, 632, 81 N.Y.S.3d 156, lv granted in part 33 N.Y.3d 1039, 103 N.Y.S.3d 12, 126 N.E.3d 1052 ; Deutsche Bank Natl. Trust Co. v. Adrian, 157 A.D.3d at 935, 69 N.Y.S.3d 706 ). We then held for the first time that just as acceleration notices must be clear and unambiguous (see Nationstar Mtge., LLC v. Weisblum, 143 A.D.3d 866, 867, 39 N.Y.S.3d 491 ; Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d 980, 983, 943 N.Y.S.2d 540 ; Sarva v. Chakravorty, 34 A.D.3d 438, 439, 826 N.Y.S.2d 74 ; see also J & JT Holding Corp. v. Deutsche Bank Natl. Trust Co., 173 A.D.3d 704, 104 N.Y.S.3d 112 ), the de-acceleration of note balances must also be clear and unambiguous to convey the fact that the previous demand for full payment of the note has been affirmatively revoked (see Milone v. U.S. Bank N.A., 164 A.D.3d at 153, 83 N.Y.S.3d 524 ). We further held in Milone, for the first time, that just as...