Bank of N.Y. Mellon v MS Global Group, LLC

Dec 20, 2023
2020-00824
Versions:

Rosenberg Fortuna & Laitman, LLP, Garden City, NY (Anthony R. Filosa and Robert Smith of counsel), for appellant.

Akerman LLP, New York, NY (Jordan M. Smith and Eric M. Levine of counsel), for respondent.

In an action, inter alia, to foreclose a mortgage, the defendant MS Global Group, LLC, appeals from an order of the Supreme Court, Kings County (Noach Dear, J.), dated December 2, 2019. The order, insofar as appealed from, denied those branches of the motion of the defendant MS Global Group, LLC, which were pursuant to CPLR 3211 (a) (5) to dismiss the complaint insofar as asserted against it as time-barred, pursuant to RPAPL 1301 (3) and CPLR 3217 (c) to dismiss the first cause of action, to foreclose the mortgage, insofar as asserted against it, and pursuant to CPLR 5015 (a) (4) to vacate a prior order of the same court dated May 9, 2019, for lack of jurisdiction.

Ordered that the order dated December 2, 2019, is modified, on the law, (1) by deleting the provision thereof denying that branch of the motion of the defendant MS Global Group, LLC, which was pursuant to CPLR 3211 (a) (5) to dismiss the second cause of action, to reform the mortgage, insofar as asserted against it as time-barred, and substituting therefor a provision granting that branch of the motion, and (2) by deleting the provision thereof denying that branch of the motion of the defendant MS Global Group, LLC, which was pursuant to CPLR 3211 (a) (5) to dismiss the first cause of action, to foreclose the mortgage, insofar as asserted against it as time-barred; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements, and the matter is remitted to the Supreme Court, Kings County, for further proceedings in accordance herewith.

In January 2006, the defendant Farkhadjan Usmanov executed a note secured by a mortgage on certain property located in Brooklyn. The mortgage was recorded on January 13, 2006. On July 21, 2006, the plaintiff commenced an action to foreclose the mortgage (hereinafter the 2006 action). When the defendants defaulted in answering or appearing, in November 2006, the Supreme Court granted the plaintiff‘s motion to appoint a referee to ascertain and compute the amount due on the note. However, on August 18, 2008, the court denied the plaintiff‘s subsequent motion to confirm the referee‘s report and for a judgment of foreclosure and sale. Thereafter, the plaintiff voluntarily discontinued the 2006 action by stipulation filed on December 31, 2009.

In March 2012, the plaintiff commenced a second action to foreclose the mortgage (hereinafter the Mar. 2012 action). However, the March 2012 action was voluntarily discontinued by notice of discontinuance dated September 22, 2015, and filed on October 8, 2015. While the March 2012 action was pending, on July 30, 2012, the plaintiff commenced a third foreclosure action (hereinafter the instant action). In February 2017, the Supreme Court granted the plaintiff‘s motion for leave to amend the complaint to add a cause of action to reform the mortgage. On July 18, 2018, the property was conveyed to MS Global Group, LLC (hereinafter MS Global), and in February 2019, the plaintiff moved to join MS Global as a necessary party. The court granted the motion by order dated May 9, 2019.

After it was served in the instant action, MS Global moved, inter alia, pursuant to CPLR 3211 (a) (5) to dismiss the complaint insofar as asserted against it as barred by the statute of limitations, pursuant to RPAPL 1301 (3) and CPLR 3217 (c) to dismiss the first cause of action, to foreclose the mortgage, insofar as asserted against it, and pursuant to CPLR 5015 (a) (4) to vacate the order dated May 9, 2019, for lack of jurisdiction. The plaintiff opposed the motion, and cross-moved for leave to enter a default judgment and for an order of reference. MS Global opposed the cross-motion. By order dated December 2, 2019, the Supreme Court denied the motion and the cross-motion. With respect to the statute of limitations, the court determined that while MS Global met its prima facie burden of demonstrating that the action was untimely, the plaintiff raised a question of fact as to whether it had standing to commence the 2006 action and to accelerate the debt at that time. However, the court noted that the issue of standing was not adjudicated to its conclusion in the 2006 action. MS Global appeals.

An action to foreclose a mortgage is governed by a six-year statute of limitations (see id. § 213 [4]; Lubonty v U.S. Bank N.A., 34 NY3d 250, 261 [2019]; U.S. Bank N.A. v Dallas, 212 AD3d 680, 682 [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 AD3d 780, 782 [2021] [internal quotation marks omitted]; see GMAT Legal Title Trust 2014-1 v Kator, 213 AD3d 915, 916 [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 Freedom Mtge. Corp. v Engel, 37 NY3d 1, 22 [2021]; GMAT Legal Title Trust 2014-1 v Kator, 213 AD3d at 916; Ditech Fin., LLC v Connors, 206 AD3d 694, 697 [2022]).

Here, in support of its motion, MS Global demonstrated, prima facie, that the six-year statute of limitations began to run on July 21, 2006, when the plaintiff commenced the 2006 action and elected to call due the entire amount secured by the mortgage (see U.S. Bank N.A. v Doura, 204 AD3d 721, 723 [2022]; Wilmington Sav. Fund Socy., FSB v Iqbal, 195 AD3d 772, 773 [2021]). MS Global further demonstrated that the instant action was commenced on July 30, 2012, more than six years after the 2006 action was commenced (see U.S. Bank N.A. v Doura, 204 AD3d at 723).

On appeal, the plaintiff argues, inter alia, that under Freedom Mtge. Corp. v Engel (37 NY3d 1 [2021]), the voluntary discontinuance of the 2006 action revoked its acceleration of the mortgage debt in that action, and thus, the instant action is timely. However, under the recently enacted Foreclosure Abuse Prevention Act (L 2022, ch 821, § 8 [eff Dec. 30, 2022] [hereinafter FAPA]), the voluntary discontinuance of the 2006 action did 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’ ” (U.S. Bank N.A. v Simon, 216 AD3d 1041, 1043 [2023], quoting CPLR 3217 [e]). Contrary to the plaintiff‘s further contention, under FAPA, it is estopped from asserting that the debt was not validly accelerated by the commencement of the 2006 action based on its lack of standing, and therefore, the instant action is timely. CPLR 213 (4), as amended by FAPA, now has paragraph (a), which provides that “[i]n any action on an instrument described under this subdivision, if the statute of limitations is raised as a defense, and if that defense is based on a claim that the instrument at issue was accelerated prior to, or by way of commencement of a prior action, a plaintiff shall be estopped from asserting that the instrument was not validly accelerated, 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.” Here, the issue of standing was not adjudicated in the 2006 action. Moreover, as the 2006 action was voluntarily discontinued, it was not “dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated” (id.). Therefore, the plaintiff is estopped under FAPA from asserting that the debt was not validly accelerated by the commencement of the 2006 action based on the plaintiff‘s lack of standing (see id. § 213 [4] [a]).

The plaintiff challenges the constitutionality of FAPA, though, contending, inter alia, that FAPA violates the Due Process Clause, the Takings Clause, and the Contracts Clause of the United States Constitution. Inasmuch as the Supreme Court did not consider the issues relating to the constitutionality of FAPA in determining that branch of MS Global‘s motion which was pursuant to CPLR 3211 (a) (5) to dismiss the first cause of action, to foreclose the mortgage, insofar as asserted against it, we remit the matter to the Supreme Court, Kings County, for consideration thereof, after any further briefing, argument, and hearing that the court deems appropriate, and for a new determination of that branch of MS Global‘s motion (see U.S. Bank N.A. v Santos, 218 AD3d 827, 829 [2023]; Deutsche Bank Natl. Trust Co. v Wong, 218 AD3d 742, 744-745 [2023]; U.S. Bank N.A. v Simon, 216 AD3d at 1043).

However, the Supreme Court should have granted that branch of MS Global‘s motion which was pursuant to CPLR 3211 (a) (5) to dismiss the second cause of action, to reform the mortgage, insofar as asserted against it as time-barred. ” ‘[A] cause of action seeking reformation of an instrument on the ground of mistake . . . is governed by the six-year statute of limitations pursuant to CPLR 213 (6), which begins to run on the date the mistake was made’ ” (Rely-On-Us, Inc. v Torres, 165 AD3d 719, 721 [2018], quoting Lopez v Lopez, 133 AD3d 722, 723 [2015]). Here, the cause of action seeking reformation of the mortgage is time-barred since the mortgage was recorded in 2006, but the court granted the plaintiff‘s motion for leave to amend the complaint to add that cause of action in 2017.

MS Global‘s remaining contentions are without merit. Dillon, J.P., Chambers, Christopher and Warhit, JJ., concur.