53rd Street, LLC v. U.S. Bank National Association
8 F.4th 74
2d Cir.2021Background
- 2006: Borrower executed a note and mortgage for property at 2052 E. 53rd Place, Brooklyn; mortgage later assigned to U.S. Bank.
- June 30, 2008: Downey S&L (later assigned) filed a foreclosure, which accelerated the mortgage; action was dismissed for nonappearance in April 2013.
- June–July 2014: Within six years of the 2008 acceleration, U.S. Bank sent letters stating the loan had been "de-accelerated" and began sending monthly statements and a 90-day pre-foreclosure notice demanding payment.
- Dec. 2016–Jan. 2018: A separate second-mortgage foreclosure led to a sale; 53rd Street LLC purchased the property at auction in Jan. 2018.
- 2018: 53rd Street LLC sued under RPAPL Article 15 to discharge U.S. Bank’s mortgage, arguing the six-year statute of limitations to foreclose expired on June 30, 2014 because U.S. Bank’s 2014 de-acceleration was ineffective; district court granted summary judgment for plaintiff relying on Milone.
- While this appeal was pending, New York Court of Appeals decided Freedom Mortgage Corp. v. Engel, rejecting Milone’s motive-based rule; the Second Circuit vacated the district court’s judgment and remanded for reconsideration under Engel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of U.S. Bank’s June–July 2014 de-acceleration communications | They were pretextual; motivated solely to avoid the limitations period and therefore ineffective | The letters and subsequent statements plainly de-accelerated and reinstated installment payments, stopping the limitations clock | District court judgment vacated; remand ordered to assess whether U.S. Bank took a clear, unambiguous affirmative act to de-accelerate under Engel (motive alone no longer dispositive) |
| Whether a lender’s motive to avoid the statute of limitations can invalidate de-acceleration | Motive should invalidate; de-acceleration was pretext to defeat RPAPL 1501 rights | Motive is irrelevant if an unambiguous affirmative revocation occurred | Engel rejects motive-based disqualification; Second Circuit relied on Engel to vacate the Milone-based ruling |
| Whether only voluntary discontinuance of a foreclosure can de-accelerate after acceleration via foreclosure filing | Implied: de-acceleration here insufficient because not a voluntary discontinuance | U.S. Bank: other affirmative acts (letters, forbearance terms, account statements) can de-accelerate | Court: Engel contemplates multiple types of affirmative acts; voluntary discontinuance is sufficient but not exclusive; remand to evaluate clarity and unambiguity of the 2014 communications |
| Whether to certify a controlling question of state law to the New York Court of Appeals | 53rd Street favored certification | U.S. Bank opposed certification | Court declined certification: federal diversity interests, cost, delay, and Engel already provides controlling guidance weighed against certification |
Key Cases Cited
- Freedom Mortgage Corp. v. Engel, 37 N.Y.3d 1 (N.Y. 2021) (rejected rule that lender motive to avoid limitations invalidates de-acceleration; de-acceleration requires an unambiguous affirmative act within six years)
- Milone v. U.S. Bank, N.A., 164 A.D.3d 145 (2d Dep't 2018) (appellate division language suggesting de-acceleration can be invalidated if motivated by avoiding limitations; abrogated by Engel)
- Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d 980 (2d Dep't 2012) (filing a foreclosure action can evidence election to accelerate; installments accrue separately absent acceleration)
- Ditmid Holdings, LLC v. JPMorgan Chase Bank, N.A., 180 A.D.3d 1002 (2d Dep't 2020) (once debt is accelerated, entire balance is due and limitations runs on whole debt)
- U.S. Bank, N.A. v. Catalfamo, 189 A.D.3d 1786 (3d Dep't 2020) (de-acceleration letters or notices must be clear and unambiguous to be valid)