Deutsche Bank Nat'l Trust Co. v. Jhon Bernal, Option One Mortg. Corp.

56 Misc.3d 915

59 N.Y.S.3d 267

DEUTSCHE BANK NATIONAL TRUST COMPANY AMERICAS, as Trustee for Mortgage Asset–Backed Pass–Through Certificates, Series 2007–QH6, Plaintiff,

v.Jhon BERNAL, Option One Mortgage Corporation, John Doe (being fictitious, the names unknown to Plaintiff intended to be tenants, occupants, persons or corporations having or claiming an interest in or lien upon the property described in the complaint or their heirs at law, distributees, executors, administrators, trustees, guardians, assignees, creditors or successors), Defendants.

70012/2015.

Supreme Court, Westchester County, New York.

May 5, 2017.

Sandelands Eyet LLP, By: Margaret S. Stefandl, Esq., Bedminster, New Jersey, Attorneys for Plaintiff.

Jasbrinder Sahni, Esq., White Plains, Attorney for defendant Jhon Bernal.

ALAN D. SCHEINKMAN, J.

In this residential foreclosure action, Defendant moves for an order dismissing the complaint and for legal fees; Plaintiff cross-moves to strike the answer and counterclaims of Defendant, or in the alternative to compel discovery.

The critical facts may be succinctly stated. Plaintiff's predecessor-in-interest brought a foreclosure action against Defendant in 2009 and, in doing so, elected to accelerate all sums due on the underlying debt. The prior action was dismissed for failure to prosecute in March 2015. One month later, the attorney for the servicer, on behalf of Plaintiff, purported to give notice to Defendant that it rescinded the acceleration. Plaintiff commenced the present action in December 2015, more than six years after the underlying debt had been accelerated. The question of law presented is whether the mortgagee has effectively rescinded the prior acceleration of the underlying debt so as to avoid application of the statute of limitations. This Court holds that, under the circumstances presented, the mortgagee did not do so and the present action is time barred.

Factual and Procedural Background

This action was commenced by the filing of a summons, complaint and notice of pendency with the Westchester County Clerk on December 2, 2015 via New York State Courts Electronic Filing system (hereafter, "NYSCEF"). Defendant Jhon Bernal (hereafter "borrower") filed an answer with counterclaims via NYSCEF on December 24, 2015. Plaintiff filed a notice of rejection of borrower's answer on December 24, 2015 and filed a reply to the counterclaims on January 13, 2016.

Plaintiff alleged in the complaint, inter alia, that on or about March 12, 2007, borrower executed and delivered a note whereby borrower promised to pay $425,000.00 plus interest on the unpaid amount due, permitting the principal balance to increase to a total maximum obligation of $467,500.00. Plaintiff further alleged that as security for payment of said note that borrower duly executed and delivered a mortgage which was recorded in the office of the Westchester County Clerk on September 20, 2007. Plaintiff stated that the mortgaged property address is known as 27 Morgan Street, New Rochelle, New York 10805. Plaintiff alleged that it is the owner and holder of the subject note and mortgage or has authority to commence this action on behalf of the owner. Plaintiff alleged that borrower defaulted on its obligations under the note and mortgage by failing to make the payment that was due on March 1, 2009 and thereafter. Plaintiff alleges that it accelerated the underlying debt by notice given on July 31, 2015.

On December 23, 2015 plaintiff filed a specialized request for judicial intervention indicating that this action was eligible pursuant to CPLR 3408(a) for a mandatory settlement conference. On December 23, 2015, the office of the clerk of the Foreclosure Settlement Conference Part (hereafter "FSCP") filed a foreclosure conference notice advising the parties to appear for an initial settlement conference on "1/25/16 at 9:30 a.m., on the 18th floor Courtroom 1803 of the Westchester County Courthouse." A copy of the notice was also sent to borrowers via U.S. Mail. On January 15, 2016 both parties appeared in the FSCP by counsel. The matter was released without settlement on that date and plaintiff was directed to resume prosecution of the action. The matter was adjourned to the FSCP Dismissal Calendar on July 8, 2016. On July 8, 2016 plaintiff's counsel appeared in the FSCP and a preliminary conference was scheduled for September 14, 2016.

A preliminary conference was held on September 14, 2016 and a preliminary conference stipulation was executed by the parties and "so-ordered" by this Court on September 28, 2016. The stipulation was filed via NYSCEF on September 29, 2016. A trial readiness conference was held on March 13, 2017 and adjourned to June 5, 2017.

Borrower filed the instant motion to dismiss the complaint and for attorneys fees on November 28, 2016. Plaintiff filed opposition to the motion and a cross-motion to strike the answer or compel discovery on January 6, 2017. The parties filed a stipulation to adjourn the motion to January 27, 2017. The motion was deemed fully submitted on that date.¹

Discussion

Defendant moves to dismiss the complaint on the basis that this action is time barred.

A foreclosure action is subject to a six-year statute of limitations (see CPLR 213[4] ). "With respect to a mortgage payable in installments, separate causes of action accrued for each installment that is not paid, and the statute of limitations begins to run, on the date each installment become due ... However, ‘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’ " Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d 980, 943 N.Y.S.2d 540 (2d Dept.2012).

It is undisputed that on July 4, 2009, Aurora Loan Services, LLC ("Aurora") filed a summons and complaint commencing a prior action regarding the same mortgage debt that is at issue in the instant action. The prior action was dismissed on March 11, 2015 for lack of prosecution. Defendant had moved for dismissal pursuant to CPLR 3216 (entitled "Want of prosecution"), which motion was not opposed by Plaintiff. Since the March 11, 2015 dismissal order did not specify that the dismissal was with "prejudice", the dismissal, by operation of law, was without prejudice ( CPLR 3216[a] ).

Defendant argues that "... clearly, the notice of acceleration was served before the complaint dated July 14, 2009 [in the prior action] was filed" (see Defendant's Memorandum of Law, Preliminary Statement). Defendant offers no evidence to show that the debt was accelerated before the filing of the summons and complaint, contending instead, that paragraph twenty-two of the mortgage at issue mandates that the lender serve a "notice of acceleration", which is a condition precedent to filing a foreclosure action. Thus, Defendant reasons, either the notice of acceleration was provided to him at least thirty days before the prior action was commenced and the debt was therefore accelerated prior to commencement, or the prior action was improperly filed as Aurora failed to meet a condition precedent.

Defendant mischaracterizes the requirement of paragraph twenty-two of the mortgage. That section does not mandate acceleration of the mortgage debt, it grants an election for the lender to accelerate the debt if certain conditions are met. Here, the complaint filed in the prior action on July 14, 2009 clearly states in paragraph five that "Plaintiff elects to call due the entire amount secured by the mortgage".

As acceleration of the mortgage debt at issue was at the discretion of the lender, the borrower must be put on notice that the lender elected to accelerate the debt. The commencement of a foreclosure action is sufficient to do so ( EMC Mtge. Corp. v. Smith, 18 A.D.3d 602, 603, 796 N.Y.S.2d 364 [2d Dept.2005] ; Clayton Natl., Inc. v. Guldi, 307 A.D.2d 982, 763 N.Y.S.2d 493 [2d Dept.2003] ); see also Wells Fargo Bank, N.A. v. Burke, supra, 94 A.D.3d at 983, 943 N.Y.S.2d 540 ). Consequently, the mortgage debt was accelerated by not later than July 14, 2009, the entire amount became due, and the Statute of Limitations began to run on the entire debt as of that date ( EMC Mtge. Corp. v. Patella, 279 A.D.2d 604, 720 N.Y.S.2d 161 [2d Dept.2001] ).² Since this action was commenced on December 2, 2015, more than six years elapsed between the acceleration and the commencement of this action, making this action vulnerable to dismissal as time barred. Stated differently, since Defendant has met his initial burden of demonstrating that the time within which to commence the action has expired, the burden shifts to Plaintiff to raise a question of fact as to whether the limitations period has been tolled or is otherwise inapplicable ( Botach Mgt. Group v. Gurash, 138 A.D.3d 771, 31 N.Y.S.3d 80 [2d Dept.2016] ; Bank of New York Mellon v. Slavin, 54 Misc.3d 311, 41 N.Y.S.3d 408 [Sup.Ct. Rensselaer County 2016] ).

Plaintiff argues that the debt at issue was not accelerated by the filing of the 2009 action because Aurora, the prior plaintiff, did not have standing to bring that action (see Plaintiff's Affirmation in Opposition ¶ 34). Plaintiff asserts that as the note contains only specific indorsements to entities other than Aurora, that Aurora could therefore not have had standing to sue, and thus lacked authority to accelerate the debt.

In support of its argument, Plaintiff cites Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d 980, 943 N.Y.S.2d 540 (2d Dept.2012). In that case, it was held that the plaintiff had voluntarily discontinued the action after having been advised that it did not have standing. In this matter, the action was not voluntarily discontinued on the basis of lack of standing, it was dismissed based on failure to prosecute. There was no no judicial determination in the prior action that the plaintiff therein, Aurora Loan Services, LLC, lacked standing. On this motion, the only evidence offered in support of the...