Taylor v. Bank of N.Y. Mellon (In re Taylor), Case No. 1–17–41643–cec

584 B.R. 590

IN RE: Joy TAYLOR aka Joy–Taylor–Simmons, Debtor.

Joy Taylor aka Joy Taylor–Simmons, Plaintiff,

v.The Bank of New York Mellon fka Bank of New York as Trustee for the Certificateholders CWALT, Inc. Alternative Loan Trust 2005–J12 Mortgage Pass–Through Certificates, Series 2005–J12 and Bayview Loan Servicing, LLC Defendants.

Case No. 1–17–41643–cec

Adv. Proc. No. 1–17–01098–cec

United States Bankruptcy Court, E.D. New York.

Signed May 4, 2018

James J. Rufo, Esq., Garvey, Cushner & Associates, PLLC, 50 Main Street, Suite 390, White Plains, New York 10606, Attorney for Plaintiff Joy Taylor

Casey B. Howard, Robert H. King, Locke Lord LLP, Brooke Place, 200 Vesey Street, New York, New York 10280, Attorneys for Defendants Bank of New York Mellon and Bayview, Loan Servicing, LLC

DECISION ON MOTION TO DISMISS

Carla E. Craig, United States Bankruptcy Judge

SUMMARY

This matter comes before the Court on the motion to dismiss ("Motion to Dismiss"), filed by The Bank of New York Mellon fka Bank of New York as Trustee for the Certificateholders CWALT, Inc. Alternative Loan Trust 2005–J12 Mortgage Pass–Through Certificates, Series 2005–J12 ("BONY CEWALT") and Bayview Loan Servicing, LLC ("Bayview", together with BONY CEWALT, the "Defendants"), the complaint (the "Complaint") (Pl.'s Am. Compl., ECF No. 2)¹ as amended and filed by Joy Taylor ("Plaintiff"). Plaintiff seeks declaratory judgment that the mortgage held by BONY CEWALT and serviced by Bayview is unenforceable against Plaintiff under N.Y. C.P.L.R. § 213(4), because the Defendants failed to foreclose on the mortgage within the six year statute of limitations period after they elected to accelerate the Loan in February, 2010. Defendants filed the Motion to Dismiss, arguing that the facts pleaded in the Complaint show that the Defendants revoked the acceleration of the Loan prior to the expiration of the limitations period.

For the reasons set forth below in this, the Motion to Dismiss is granted.

JURISDICTION

This Court has jurisdiction over this core proceeding pursuant to 28 U.S.C. §§ 1334(a), 157(a) and 157(b)(2)(B). This decision constitutes the Court's findings of fact and conclusions of law to the extent required by Federal Rule of Bankruptcy Procedure 7052.

FACTS

Plaintiff and her husband, David Simmons, are the owners of the real property located at 447 Saratoga Avenue, Brooklyn, New York 11233 (the "Property"). (Pl.'s Am. Compl. ¶ 10–11, ECF No. 2). Plaintiff and her husband executed a note (the "Note") in favor of M.L. Moskowitz & Co. Inc. d/b/a Equity Now ("MLM") for the principal amount of $332,500 (the "Loan"), on June 22, 2005, which was secured by a mortgage on the Property granted in favor of Mortgage Electronic Registration Systems, Inc. as MLM's nominee, also dated June 22, 2005 and duly recorded on July 7, 2005 (the "First Mortgage"). (Pl.'s Am. Compl. ¶ 12, ECF No. 2). The Note was assigned to BONY CEWALT, on June 18, 2007, which assignment was duly recorded on December 11, 2007. (Pl.'s Am. Compl. ¶ 13, ECF No. 2). Bayview services the Note and the First Mortgage on behalf of BONY CEWALT. (Pl.'s Am. Compl. ¶ 14, ECF No. 2).²

Upon the Plaintiff's default on the Loan, BONY CEWALT commenced an action to foreclose the First Mortgage in the Supreme Court of New York, County of Kings, Index No. 004036/2010 on February 17, 2010 (the "Foreclosure Action"). (Pl.'s Am. Compl. ¶ 23, ECF No. 2). The parties engaged in foreclosure settlement conferences as directed by the state court between July, 2010 and September 2013, after which there was no further activity in the Foreclosure Action. (Pl.'s Am. Compl. ¶¶ 24–25, ECF No. 2). Bayview prepared and mailed a letter, dated February 10, 2016, notifying the Plaintiff that the Loan had been de-accelerated and "re-instituted" as an installment loan (the "De–Acceleration Letter"). (Pl.'s Am. Compl. ¶ 26, ECF No. 2) (Defs.' Mot. to Dismiss, ECF No. 13, Ex. 3). The Foreclosure Action was discontinued on July 27, 2016 (Pl.'s Am. Compl. ¶ 28, ECF No. 2), and in August, 2016, the attorneys of BONY CEWALT mailed a "Stipulation of Discontinuance" and "Stipulation Canceling Notice of Pendency" dated August 17, 2016 to Plaintiff's attorney. (Pl.'s Am. Compl. ¶ 27, ECF No. 2).

Plaintiff filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on April 5, 2017, which lists BONY CEWALT as a secured creditor with a claim of $462,000. (Case No. 17–41643–CEC, ECF. No. 1.) BONY CEWALT filed a proof of claim in the amount of $561,940.84 on July 7, 2017. (Case No. 17–41643–CEC, Claim No. 7–1.) The Plaintiff thereafter commenced this adversary proceeding seeking (1) a judgment pursuant to N.Y. C.P.L.R. § 213(4) declaring that the Note and First Mortgage are unenforceable against the Plaintiff because the six year statute of limitations period within which to foreclose the First Mortgage has expired; (2) a declaratory judgment that the six-month ‘saving’ provision of N.Y. C.P.L.R. § 205(a) is unavailable to the Defendants; and (3) that the Defendants' proof of claim, Claim No. 7–1, is expunged and disallowed pursuant to 11 U.S.C. § 502(b)(2). (Pl.'s Am. Compl. ¶¶ 45–67, ECF No. 2).

Plaintiff asserts that the First Mortgage is unenforceable because the Defendants failed to perform an affirmative and unambiguous act which constituted a revocation of the acceleration of the Loan prior to the expiration of the statute of limitations period on February 17, 2016, because the Defendants did not seek to discontinue the Foreclosure Action until July, 2016, after the period had expired. (Pl.'s Opp'n to Defs.' Mot. to Dismiss, at 8–9, ECF No. 16). They further assert that sending the De–Acceleration Letter, while the Foreclosure Action was still pending in state court, was not an affirmative act sufficient to revoke the acceleration of the Loan. (Pl.'s Opp'n to Defs.' Mot. to Dismiss, at 9, ECF No. 16).

The Defendants take the position that the De–Acceleration Letter constituted an affirmative act which revoked the acceleration of the Loan before the statute of limitation period expired. (Defs.' Mot. to Dismiss, ECF No. 13).

DISCUSSION

A. Standard of Review

A complaint may be dismissed "for failure to state a claim upon which relief can be granted" pursuant to Federal Rule of Civil Procedure 12(b)(6), incorporated by reference in Federal Rule of Bankruptcy Procedure 7012. See Fed. R. Civ. P. 12(b)(6). See also, Fed. R. Bankr. P. 7012(b). In making its determination on a motion to dismiss, "a court must liberally construe the complaint, accept the factual allegations as true, and draw all reasonable inferences in favor of the plaintiff." JJCC Real Estate LLC v. Brooklyn Renaissance, LLC (In re Brooklyn Renaissance, LLC), 556 B.R. 68, 74 (Bankr. E.D.N.Y. 2016) (citing Goldstein v. Pataki, 516 F.3d 50, 56 (2d Cir. 2008) ). To survive a motion to dismiss, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). See also, Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). Determining whether a complaint states a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937. "Plausibility ‘depends on a host of considerations: the full factual picture presented by the complaint, the particular cause of action and its elements, and the existence of alternative explanations so obvious that they render plaintiff's inferences unreasonable.’ " Brooklyn Renaissance, LLC, 556 B.R. at 74 (citing Fink v. Time Warner Cable, 714 F.3d 739, 741 (2d Cir. 2013) (quoting L–7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 430 (2d Cir. 2011) ).

On a motion to dismiss the court may consider:

(1) facts alleged in the complaint and documents attached to it or incorporated in it by reference, (2) documents "integral" to the complaint and relied upon in it, even if not attached or incorporated by reference, (3) documents or information contained in defendant's motion papers if plaintiff has knowledge or possession of the material and relied on it in framing the complaint, (4) public disclosure documents required by law to be, and that have been, filed with the Securities and Exchange Commission, and (5) facts of which judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence.

Weiss v. Inc. Vill. of Sag Harbor, 762 F.Supp.2d 560, 567 (E.D.N.Y. 2011) (citing In re Merrill Lynch & Co., Inc., 273 F.Supp.2d 351, 356–57 (S.D.N.Y. 2003) (internal citations omitted), aff'd in part and vacated in part on other grounds sub nom. , Dabit v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25 (2d Cir. 2005), vacated on other grounds , 547 U.S. 71, 126 S.Ct. 1503, 164 L.Ed.2d 179 (2006) ; Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991) (internal citations omitted); Brodeur v. City of N.Y., No. 04 Civ. 1859, 2005 WL 1139908, at *2-3, 2005 U.S. Dist. LEXIS 10865, at *9–10 (E.D.N.Y. May 13, 2005) (internal citations omitted).

The Court therefore relies on the Complaint and the De–Acceleration Letter, which was referenced in the Complaint and attached to the Motion to Dismiss, in deciding this motion.

B. Acceleration and De-acceleration of the Loan

A mortgage foreclosure action is governed by the six-year statute of limitations imposed by New York C.P.L.R. § 213(4), which states that "an action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein" must be commenced within six years. The statute of...