U.S. Bank Tr. Nat'l Ass'n v. Joerger

214 N.Y.S.3d 876

83 Misc.3d 605

U.S. BANK TRUST NATIONAL ASSOCIATION, Not in Its Individual Capacity but Solely AS Owner TRUSTEE FOR RCF 2 ACQUISITION TRUST, Plaintiff,

v.Brian JOERGER; Phyllis Joerger; Commerce Bank, NA; "John Doe #1" through "John Doe #10" inclusive, the names of the ten last name, 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.

Supreme Court, Suffolk County.

Decided on March 8, 2024

KNUCKLES, KOMOSINSKI, &MANFRO, LLP, Attys for Plaintiff, 600 East Crescent Ave. Suite 201, Upper Saddle River, NJ 07458

THE RANALLI LAW GROUP, PLLC, Attys, for Def. Phyllis Joerger, 742 Veterans Hwy, Hauppauge, NY 11788

Thomas F. Whelan, J.

It is,

ORDERED that the motion (#001) by defendant Phyllis Joerger seeking dismissal of the complaint is denied; and it is further

ORDERED that plaintiff’s counsel and defendant’s counsel are directed to appear on April 18, 2024 at 9:30am in the courtroom of the undersigned in Part 33 located in the Supreme Court Annex Bldg, at One Court Street, Riverhead, New York, for a status conference. In the event a motion is filed on or before April 16, 2024, no conference will be necessary on April 18, 2024; and it is further

ORDERED that movant is directed to file a notice of entry within five days of receipt of this Order pursuant to 22 NYCRR § 202.5-b(h)(2)

This is an action to foreclose a mortgage on residential real property situate in Lindenhurst. In essence, on February 21, 2006, defendant Brian Joerger agreed to repay $280,000.00 to plaintiff’s predecessor in interest and executed a promissory note . and, together with Phyllis Joerger, a mortgage. The defendant ceased making monthly payments as of May 1, 2009. An action for foreclosure was therefore commenced on May 7, 2013 at Suffolk County Index Number 12336/2013 ("Action #1"). Defendant Brian Joerger filed an answer, and no other defendants appeared. On June 27, 2022, this Court issued a Memo Decision and Order determining three motions. First, the Court granted that the branches of the plaintiff’s motion (#001) for an award of summary judgment as against the answering defendant Brian Joerger dismissing eight of the nine asserted affirmative defenses, and denied summary judgment with regard to the remaining defense. Second, the Court granted defendant Phyllis Joerger’s cross motion (#002) to dismiss the complaint as against her. Third, defendant Brian Joerger’s cross motion (#003) for summary judgment was denied. After a conference with the parties, plaintiff filed another motion (#004) seeking dismissal of the fourth affirmative defense, and the defendant Brian Joerger filed a cross motion for (#005) summary judgment and dismissal of the complaint. By Order dated March 9, 2023, the Court granted the plaintiff’s motion and denied the defendant’s cross motion.

On November 18, 2022, the plaintiff, relying on the version of CPLR 205(a) in effect at the time, commenced the instant action. A supplemental summons and amended complaint were thereafter filed on December 6, 2022. The plaintiff noted in the complaint that Action #1 would be consolidated with the new action.

On December 30, 2022, the Foreclosure Abuse Prevention Act ("FAPA," L 2022, ch 821) went into effect.

On January 19, 2023, defendant Phyllis Joerger (hereinafter solely "the defendant"), through counsel, filed an answer alleging seven affirmative defenses and three counterclaims. Thereafter, on March 13, 2023, the defendant, through counsel, filed the instant motion (#001) seeking dismissal of the complaint pursuant to CPLR 3211(a)(1), (2), (5) and/or (8), challenging, inter alia, service upon the movant, the timeliness of the action, and the plaintiff’s compliance with Banking Law 6-1. The defendant further contends that statutes applicable in this case as amended by FAPA — that is, CPLR 205(a) and CPLR 213(4) — are to be applied retroactively and support dismissal of the complaint. The plaintiff opposes the motion and notes that application of FAPA would constitute an unconstitutional and improper retroactive application. The defendant filed a reply.

The Court begins with its discussion of FAPA.

Foreclosure Abuse Prevention Act

On February 18, 2021, the Court of Appeals rendered its decision in Freedom Mtge. Corp. v. Engel, 37 N.Y.3d 1, 146 N.Y.S.3d 542, 169 N.E.3d 912 (2021) and reaffirmed the circumstances under which the acceleration of amounts due under a note secured by a mortgage are "deaccelerated" or, in other words, when the acceleration of a mortgage debt is revoked. The Engel Court held that the voluntary discontinuance of an action constituted a rev- ocation of the debt which was accelerated with the commencement of a foreclosure action.

New York State Legislature Reaction

Nearly two years later, on December 30, 2022, FAPA went into effect. According to the legislative sponsor in the New York State Senate, FAPA’s purpose is to "overrule the Court of Appeals’ recent decision in Freedom Mtge. Corp. v. Engel" (Senate Introducer’s Mem in Support, Bill Jacket, L 2022, ch 821 [#S5473(D), Sanders, revised 5-4-2022]). The sponsor notes that "abuses of the Judicial foreclosure process … have been sanctioned by the Judiciary … [resulting] in perversion of long-standing law and creating] an unfair playing field that favors the mortgage banking and servicing industry at the expense of every day New Yorkers" (id.). The "aim of the bill is to thwart and eliminate abusive and unlawful litigation tactics that have been employed by foreclosure plaintiffs to the prejudice of homeowners throughout New York," and to "level the playing field … further clarify and reaffirm the legislative intent of a wide spectrum of laws that have been: (1) manipulated and abused by mortgage lending and servicing institutions; and (2) misunderstood and/or misapplied by the courts" (id. [emphasis added]).

The legislative sponsor in the New York State Assembly noted that a section of the new legislation was "a response to the Court of Appeals’ recent holding Freedom Mtge. Corp. v. Engel, 37 N.Y.3d 1, 146 N.Y.S.3d 542, 169 N.E.3d 912 (2021). This will restore longstanding law that made it clear that a lenders’ discontinuance of a foreclosure action that accelerate a mortgage loan does not serve to reset the statute of limitations" (Assembly Introducer’s Mem in Support, Bill Jacket, L 2022, ch 821 [#A7737B, Weinstein]).

FAPA amended six laws: CPLR 203, CPLR 205, CPLR 213, CPLR 3217, RPAPL § 1301 and GOL § 17-105. FAPA section 10 provides that it "shall take effect immediately and shall apply to all actions commenced on [a note and mortgage] in which a final judgment of foreclosure and sale has not been enforced" (FAPA § 10).

FAPA’s Misunderstanding of Existing Law

The legislature’s unprecedented attack upon the judiciary, with its assault upon the Court of Appeals holding in Engel, ignores the long line of cases which stood for the judicial standard that historically existed in this area of law — that is, that where there is a validly filed stipulation of discontinuance resolving a case, it is as if the case "had never been begun" (Yonkers Fur Dressing Co. Inc. v. Royal Ins. Co. Ltd., 247 N.Y. 435, 444, 160 N.E. 778 [1928]).

In the ancient case of Loeb v. Willis, 100 N.Y. 231, 235, 3 N.E. 177 (1885), the Court of Appeals stated:

The foreclosure action was discontinued and all the proceedings therein thus annulled. There was no longer any record or adjudication in that action which bound any one. By the discontinuance of an action the further proceedings in the action are arrested not only, but what has been done therein is also annulled, so that the action is as if it never had been.

(Loeb, 100 N.Y. at 235, 3 N.E. 177 [italics added]; see also Brown v. Cleveland Tr. Co., 233 N.Y. 399, 406, 135 N.E. 829 [1922].)

The Court of Appeals in Kilpatrick v. Germania Life Ins. Co., 183 N.Y. 163, 75 N.E. 1124 (1905), explained that in the face of a discontinuance, the election made in a foreclosure action to treat a mortgage debt as due only becomes "final and irrevocable after [the mortgagor’s] change of position and assumption of legal obligations, the direct result of that election" (Kilpatrick, 183 N.Y. at 168, 75 N.E. 1124).

The Second Department had long adhered to the above rules. In Newman v. Newman, 245 A.D.2d 353, 665 N.Y.S.2d 423 (2d Dept. 1997), the court held, "[w]hen an action is discontinued, it is as if it had never been; everything done in the action is annulled and all prior orders in the case are nullified (Brown v. Cleveland Trust Co., 233 N.Y. 399 [135 N.E. 829]; Weldotron Corp. v. Arbee Scales, 161 A.D.2d 708 [555 N.Y.S.2d 844]; Miehle Print. Press & Mfg. Co. v. Amtorg Trading Corp., 278 App. Div. 682 [103 N.Y.S.2d 493])" (Newman, 245 A.D.2d at 354, 665 N.Y.S.2d 423).

In Golden v. Ramapo Imp. Corp., 78 A.D.2d 648, 432 N.Y.S.2d 238 (2d Dept. 1980), the Second Department noted that "[t]he general rule is that waiver of the right to accelerate the mortgage debt is discretionary with the mortgagee" (Golden, 78 A.D.2d at 650, 432 N.Y.S.2d 238, citing Adler v. Berkowitz, 254 N.Y. 433, 437, 173 N.E. 574 [1930]; Odell v. Hoyt, 73 N.Y. 343 [1878]). The Court went on to hold, "That she [plaintiff] was under no restraint in changing her mind is likewise clear: only if a mortgagor can show substantial prejudice will a court in the exercise of its equity jurisdiction restrain the mortgagee from revoking its election to accelerate" (Golden, 78 A.D.2d at 650, 432 N.Y.S.2d 238, citing Kilpatrick, 183 N.Y. 163, 75 N.E. 1124 [additional citations omitted]).

As noted by then Justice Daniel F. Luciano in Housberg v. Baker, 146 Misc.2d 960, 553 N.Y.S.2d 280 (Sup. Ct., Suffolk County 1990), quoting a treatise on New York law:

"When an action is discontinued, it is as if the action had never been;

...