Genovese v. Nationstar Mortg. LLC

199 N.Y.S.3d 513 (Mem)

Deborah GENOVESE, as Executor of the Estate of Joseph Genovese, Plaintiff–Appellant,

v.NATIONSTAR MORTGAGE LLC doing business as Champion Mortgage Company, Defendant–Respondent.

Appeal No. 666

Index No. 805874/22E

Case No. 2023–00096

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

Entered: December 19, 2023

Padernacht Law, P.C., Bronx (Daniel A. Padernacht of counsel), for appellant.

Nelson Mullins Riley & Scarborough LLP, New York (Alan F. Kaufman and Lisa A. Herbert of counsel), for respondent.

Cynthia S. Kern, J.P., Peter H. Moulton, Manuel J. Mendez, John R. Higgitt, Kelly O'Neill Levy, JJ.

HIGGITT, J.

On March 13, 2006, plaintiff's decedent executed a reverse mortgage in favor of Wells Fargo Bank encumbering his single-family home in the Bronx. The reverse mortgage, which was designed to allow the elderly homeowner to borrow money against the accumulated equity in his home, provided that the outstanding loan balance needed to be repaid upon the occurrence of a triggering event, one of which was the death of the borrower (see Bank of Am., N.A. v. Gulnick, 170 A.D.3d 1365, 1365–1366, 95 N.Y.S.3d 639 [3d Dept. 2019], lv denied 34 N.Y.3d 908, 2020 WL 728411 [2020] ; Onewest Bank, FSB v. Smith, 135 A.D.3d 1063, 1063–1064, 22 N.Y.S.3d 674 [3d Dept. 2016] ). Plaintiff's decedent died on March 18, 2008, triggering repayment.

On May 14, 2009, Wells Fargo commenced an action to foreclose the mortgage; the action was commenced against the decedent's heirs. At the time the action was commenced, no fiduciary had been appointed to represent the decedent's estate. Paragraphs 7 and 10 of the foreclosure action complaint expressly asserted that Wells Fargo had accelerated the debt secured by the mortgage.¹

On December 2, 2009 -- almost seven months after Wells Fargo commenced the foreclosure action -- co-executors of the decedent's estate were appointed by the Surrogate's Court of Bronx County.

Notwithstanding that the action was commenced in the spring of 2009, Wells Fargo did not secure an order of reference until September 15, 2015. Seven months later, Wells Fargo obtained a judgment of foreclosure and sale. The judgment of foreclosure and sale was vacated, however, by an April 7, 2017 order of Supreme Court (Kenneth L. Thompson, J.) on the ground that the court lacked personal jurisdiction over the defendants -- the decedent's heirs. Supreme Court found that it lacked jurisdiction over the defendants because "a plaintiff is unable to commence an action during the period between the death of a potential defendant and the appointment of a representative of the estate" (quoting Laurenti v. Teatom, 210 A.D.2d 300, 301, 619 N.Y.S.2d 754 [2d Dept. 1994] ), and no representative had been appointed for the decedent's estate at the time the foreclosure action was commenced. The court did not mention the subject of the acceleration of the mortgage debt. In addition to vacating the judgment of foreclosure and sale, the court dismissed the mortgage foreclosure complaint.

On September 25, 2017, Wells Fargo assigned the mortgage to defendant Nationstar Mortgage LLC.

Five years after the April 7, 2017 order vacating the judgment of foreclosure and sale and dismissal of the mortgage foreclosure action (and approximately four and a half years after the assignment of the mortgage to Nationstar), plaintiff, one of the two individuals named as co-executors of the decedent's estate, commenced this RPAPL 1501(4) action against Nationstar to cancel and discharge the mortgage.² Plaintiff alleged that, based on the representations in the complaint in the foreclosure action, Nationstar's predecessor-in-interest (Wells Fargo) validly accelerated the mortgage debt in 2009; that the acceleration of the debt triggered the six-year statute of limitations applicable to a mortgage foreclosure action; and that the statute of limitations on such an action had expired.

Defendant moved to dismiss the RPAPL 1501 complaint under CPLR 3211(a)(7) on the grounds that the debt secured by the mortgage had not been validly accelerated in the foreclosure action because that action was a nullity, the six-year statute of limitations to commence a foreclosure action had not begun to run (let alone expire), and, therefore, an action to foreclose the mortgage was not time-barred.

Supreme Court granted defendant's motion and dismissed the RPAPL 1501 complaint. The court determined that the foreclosure action was a nullity because Wells Fargo commenced the action against the decedent's heirs before a fiduciary had been appointed to represent the decedent's estate. "The commencement of the dismissed foreclosure action that is a legal nullity did not trigger the running of the statute of limitations under RPAPL 1501(4), and consequently, the plaintiff's complaint seeking to cancel and discharge the mortgage must be dismissed," wrote the court. As to whether the debt secured by the mortgage had been accelerated by the foreclosure action, Supreme Court intimated that it had not because the foreclosure action was a nullity.

After Supreme Court issued its order dismissing the RPAPL 1501 complaint but before plaintiff perfected her appeal from that order, the Legislature passed and the Governor signed into law the Foreclosure Abuse Prevention Act (FAPA) (L 2022, ch 821). FAPA represents the Legislature's response to litigation strategies and certain legal principles that distorted the operation of the statute of limitations in foreclosure actions (Assembly Mem in Support of 2022 Assembly Bill A7737B, L2022, ch 821 at 1; Senate Introducer's Mem in Support of 2022 N.Y. Senate Bill S5473D at 1). "The legislature [found] that there is an ongoing problem with abuses of the judicial foreclosure process and lenders’ attempts to manipulate statutes of limitations; that the problem has been exacerbated by recent court decisions which, contrary to the intent of the legislature, have given mortgage lenders and loan servicers opportunities to avoid strict compliance with remedial statutes and manipulate statutes of limitations to their advantage; and that the purpose of [FAPA] is to clarify the meaning of existing statutes, and to rectify these erroneous judicial interpretations thereof" (Assembly Mem in Support of 2022 Assembly Bill A7737B, L2022, ch 821 at 1). FAPA's aim: "to thwart and eliminate abusive and unlawful litigation tactics that have been adopted and pursued in mortgage foreclosure actions to manipulate the law and judiciary to yield to expediency and the convenience of mortgage banking and servicing institutions at the expense of the finality and repose that statutes of limitations are meant to ensure" (id. ; see also Senate Introducer's Mem in Support of 2022 N.Y. Senate Bill S5473D at 1).

Although FAPA effected a number of important changes to the RPAPL (i.e., RPAPL 1301[3], [4] ), the General Obligations Law (i.e., General Obligations Law § 17–105[4], [5] ), and the CPLR (e.g., CPLR 203[h], 205[c], 205–a, 3217[e] ), this appeal implicates only one: the addition of paragraph b to CPLR 213(4) (see L 2022, ch 821, § 7). The new CPLR 213(4)(b) provides that, in an action under RPAPL 1501(4) to cancel and discharge a mortgage, "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." According to Senator Sanders’ introducer's memorandum in support of FAPA, the addition of paragraph (b) would

"(1) clarify and codify the applicable principles of estoppel, insofar as all acceleration events, whether occurring prior to or by way of commencement of an action, are presumptively valid, unless a prior action was dismissed upon a timely interposed defense, asserted in a defendant's motion or application, based on an express judicial determination that no valid election to accelerate the instrument occurred prior to or by way of the commencement of that action; and (2) reflect the Legislature's recognition of the inherent difficulties defendants encounter in establishing a valid statute of limitations defense which, as per recent case law, may now depend on information and documents that are generally not in their possession and may otherwise be unavailable due to the passage of time" (Senate Introducer's Mem in Support of 2022 N.Y. Senate Bill S5473D at 14–15 [internal citations omitted]).

FAPA was signed by the Governor on December 30, 2022, and took "effect immediately," applying "to all actions commenced on an instrument described under [ CPLR 213(4) ] in which a final judgment of foreclosure and sale has not been enforced" (L 2022, ch 821, § 10).

On plaintiff's appeal from Supreme Court's order granting defendant's motion to dismiss, plaintiff argues that, under CPLR 213(4)(b), defendant is estopped from asserting that the statute of limitations on a cause of action to foreclose on the mortgage has not expired. Plaintiff highlights that the present action seeks relief under RPAPL 1501(4), the prior foreclosure action was not dismissed based on an express judicial determination (prompted by a timely interposed defense) that the debt secured by the mortgage was not validly accelerated, and that no judgment of foreclosure and sale has been issued. Although FAPA was signed into law after Supreme Court issued its order dismissing the RPAPL 1501 complaint (and approximately three years after the mortgage foreclosure action was dismissed), plaintiff contends that the act applies retroactively.

Plaintiff also argues that defendant's predecessor's filing of the foreclosure complaint containing representations that the debt secured by the mortgage had been accelerated...