Rushmore Loan Mgmt. Servs. v. Petti

1

2024 NY Slip Op 30180(U)

RUSHMORE LOAN MANAGEMENT SERVICES, LLC, Plaintiff, v. ANTHONY PETTI; 21647 LLC; BOARD OF MANAGERS OF THE WOOD BROKE EST A TES CONDOMINIUM, SECTION II-B; NEW YRK CITY ENVIRONMENTAL CONTROL BOARD; NEW YORK CITY PARKING VIOLATIONS BUREAU; STATE OF NEW YORK MORTGAGE AGENCY; HSBC MORTGAGE CORPORATION (USA); RICHMOND COUNTY CLERK; "JOHN DOE #1" through "JOHN DOE #10" inclusive the names of the ten last named Defendants being fictitious, real names unknown to the Plaintiff, the parties intended being persons or corporations having an interest in, or tenants or persons in possession of portions of the mortgaged premises described in the Complaint, Defendants.

Index No. 135031/2020, Motion Nos. 002 & 003

Supreme Court, Richmond County

January 5, 2024

Unpublished Opinion

DECISION AND ORDER

Desmond Green, J.

The following e-filed documents listed by NYSCEF as (Motion 002) document numbers 43-67, 104 and (Motion 003) document numbers 68-92, 95-103, 105-112 were submitted and reviewed.

Based upon the foregoing, Plaintiffs motion is denied. Defendant's cross-motion is granted for the reasons set forth below.

In this action, Plaintiff seeks to foreclose on a mortgage encumbering real property located at 101 Hampton Place Staten Island, NY 10309. The mortgage, dated August 10, 2007 was given by Defendant Anthony Petti (hereinafter "Petti") to non-party Wall Street Mortgage Bankers Ltd. The mortgage secures a loan with an original principal amount of $249,6000 which is evidenced by a note of the same date as the mortgage. Petti defaulted in repayment of the loan on or about December 1, 2011. Non-party Wall Street Mortgage Bankers, Ltd., the alleged noteholder at the time, commenced an action to foreclose the mortgage on October 11, 2012, by filing a summons and complaint (hereinafter "the 2012 Action"). In that complaint, plaintiff pled that it "elect[ed] to declare immediately due and payable the entire unpaid balance of principal." On or about December 1, 2013, Petti executed and delivered a mortgage modification agreement (hereinafter "Modification Agreement"), which modified the principal balance to form a new lien in the among of $293,666.87.^[1] On February 29, 2016, plaintiff filed an Affirmation Discontinuing Action with the Richmond County Clerk's Office, in which it stated that "plaintiff requested that the action be discontinued, and the notice of pendency canceled due to a loan modification." The affirmation further stated that "acceleration of the loan is hereby rescinded."

While the 2012 Action was pending, Defendant 21647 LLC (hereinafter "Defendant 21647") became and remains the owner of the property. Defendant took title to the premises via a referee's deed dated February 16, 2018. The referee was appointed in a judgment and of foreclosure and sale, dated September 14, 2015, issued in an action brought by Board of Managers of Woodbroke Estates Condominium Section II-B, a defendant in this action, to foreclose on a lien for common charges under Index No. 100798/2014 (hereinafter "the Condo Lien Foreclosure").

Plaintiff commenced this action on January 27, 2020, again seeking foreclosure on the 2007 mortgage. Issue was joined by Defendant 21647, which raised numerous affirmative defenses in its answer, including expiration of the statute of limitations.

Now, Plaintiff moves for summary judgment against Defendant 21647, to strike its answer and affirmative defenses, and for an order of reference. Defendant 21647 opposes and cross-moves requesting reverse summary judgment dismissing the complaint based upon expiration of statute of limitations and the amendments made to the applicable statutes under the Foreclosure Abuse Prevention Act ("FAPA"). Plaintiff opposes the cross-motion positing, inter alia, that FAPA has neither retroactive effect nor application as well as that retroactive application of FAPA would violate the Due Process Clauses of the Fifth and Fourteenth Amendments to the United States Constitution and the Takings Clause thereof.

At the outset, Plaintiffs claim that Defendant 21647 lacks standing to rely on provisions of FAPA is without merit. FAPA contains no limiting language such as "owner or mortgagor." Instead, the legislative history reveals that FAPA was intended to apply to "all actions." Further, FAPA's purpose was not only to protect residential homeowners, but to relieve "burdens on the courts" (Wilmington Sav. Fund Socy., FSB v E. Fork Capital Equities, LLC, 2023 NY Slip Op 33847[U] [Sup Ct, NY County 2023]).

The following inquiry must be whether the enactments of FAPA are retroactively applicable to this action.

An action to foreclose a mortgage is governed by a six-year statute of limitations (see CPLR 213[4]; Lubonty v U.S. Bank N.A., 34 N.Y.3d 250, 261 [2019]; U.S. Bank N.A. v Dallas, 212 A.D.3d 680, 682 [2d Dept 2023]). "[E]ven 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" (BHMPW Funding, LLC v Lloyd-Lewis, 194 A.D.3d 780, 782 [2d Dept. 2021]; GMAT Legal Title Trust 2014-1 v Kator, 213 A.D.3d 915, 916 [2d Dept 2023]). Acceleration occurs, inter alia, by the commencement of a foreclosure action wherein the holder of the note elects in the complaint to call due the entire amount secured by the mortgage (see MTGLQ Investors, L.P. v Singh, 216 A.D.3d 1087 [2d Dept 2023]; Ditech Fin., LLC v Connors, 206 A.D.3d 694, 697 [2d Dept. 2022]). Here, the Defendant demonstrates, prima facie, that the six-year statute of limitations began to run on or about October 11, 2012, when Wall Street Mortgage Bankers, Ltd. commenced the 2012 Action and elected to call due the entire amount secured by the mortgage (see U.S. Bank N.A. v Doura, 204 A.D.3d 721, 723 [2d Dept. 2022]; Wilmington Sav. Fund Socy., FSB v Iqbal, 195 A.D.3d 772, 773 [2d Dept. 2021]). Wall Street Mortgage Bankers, Ltd. discontinued the 2012 Action on February 29, 2016. Plaintiff commenced the instant action on January 27, 2020.

In Freedom Mtge. Corp. v Engel (37 N.Y.3d 1 [2021]), the Court held that a noteholder's voluntary discontinuance of a foreclosure action constitutes an affirmative act of revocation of acceleration as a matter of law. Once a case was voluntarily discontinued, the clock would reset, allowing the plaintiff to start a new action, provided that the discontinuance was filed before the expiration of the six-year statute of limitations.

The enactment of FAPA on December 30, 2022 amended, inter alia, CPLR §3217 as follows:

(e) Effect of discontinuance upon certain instruments. In any action on an instrument described under subdivision four of section two hundred thirteen of this chapter, the voluntary discontinuance of such action, whether on motion, order, stipulation or by notice, shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute.

This amendment, inter alia, to CPLR §3217 by FAPA specifically overrules the Court of Appeals holding in Freedom Mortgage Corp. v Engel that a voluntary discontinuance constitutes an affirmative revocation of acceleration for statute of limitations purposes.

In addition to FAPA's amendment to CPLR §3217, FAPA amended five more statutory provisions: CPLR §203, CPLR §205, CPLR §213, RPAPL §1301, GOL § 17-105, and added CPLR § 205-a. According to the Bill Jacket, the stated purpose and intent of FAPA, inter alia, is to "ensure the laws of this state apply equally to all litigants, including those currently involved in mortgage foreclosures and related actions" and "to thwart and eliminate abusive and unlawful litigation tactics that have been employed by foreclosure plaintiffs" (Sponsor Memo, Bill Jacket, L. 2022, ch 821). FAPA recognized that "the problem has been exacerbated by 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 limitation to their advantage". (Id.).

Plaintiff argues that FAPA cannot be applied retroactively to the case now pending before this Court. However, this claim is belied by the express language of the statute (see Deutsche Bank National Trust Company as Trustee for Registered Holders of Morgan Stanley ABS Capital I Inc. Trust 2006-HE5 v Dagrin, 79 Misc.3d 393 [Sup. Ct., Queens County 2023]). FAPA (§10) states that "[t]his act shall take effect immediately and shall apply to all actions commenced on an instrument described under subdivision four of section two hundred thirteen of the civil practice law and rules in which a final judgment of foreclosure and sale has not been enforced." In the instant case, there is no final judgment of foreclosure nor has a sale been enforced. The case was voluntarily discontinued in 2016 and the current action was not started until 2020. As the case is still pending, the FAPA applies retroactively according to the statute.

Plaintiff also argues that the retroactive application of FAPA is unconstitutional, as it violates due process. While "[r]etroactivity is generally disfavored in the law" (Eastern Enterprises v. Apfel, 524 US. 498 [1998]), courts defer to the legislature where the applicable legislation contains express language pertaining to retroactivity "unless it reaches so far into the past or so unfairly as to constitute a deprivation of property without due process" (Varrington Corp. v City of New York Dep't of Fin., 85 N.Y.2d 28, 32 [1995]). Further, a statute's retroactive application must be "supported by legitimate purpose furthered by rational means" (United States v...