| Trust v Barua |
| Decided on June 3, 2020 |
| Appellate Division, Second Department |
| Dillon, J. |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| This opinion is uncorrected and subject to revision before publication in the Official Reports. |
Decided on June 3, 2020 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
ALAN D. SCHEINKMAN, P.J.
MARK C. DILLON
JOHN M. LEVENTHAL
ROBERT J. MILLER, JJ.
2017-12206
(Index No. 611910/15)
v
Himon Barua, appellant, et al., defendants.
APPEAL by the defendant Himon Barua, in an action to foreclose a mortgage, from an order of the Supreme Court (Peter H. Mayer, J.) dated September 7, 2017, and entered in Suffolk County. The order, insofar as appealed from, denied that defendant's motion pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against him as time-barred and to cancel a lis pendens filed against the subject property.
Ehsanul Habib, Forest Hills, NY, for appellant.
Knuckles, Komosinski & Manfro, LLP, Elmsford, NY (Jordan J. Manfro of counsel), for respondent.
DILLON, J.
OPINION & ORDER
This is an appeal that involves the commencement of a mortgage foreclosure action that accelerated the full balance of the debt, the discontinuance of that action, the later commencement of a second action on the same note, and the statute of limitations. For reasons set forth below, we hold that the second action was time-barred, as it was commenced beyond the applicable six-year statute of limitations of CPLR 213(4). We also address whether the mere discontinuance of an action, in and of itself, nullifies any debt acceleration demanded in a foreclosure plaintiff's complaint, absent other communication to the borrower that de-acceleration is also intended by the discontinuance.
I. Relevant Facts
On July 25, 2006, the defendant Himon Barua (hereinafter the defendant) executed a note in the sum of $312,000 in favor of JPMorgan Chase Bank, N.A. (hereinafter Chase). The note was secured by a residential mortgage executed by both the defendant and the defendant Emon Barua encumbering certain real property located in Brentwood (hereinafter the subject property). The defendant allegedly defaulted in his monthly payment obligations on the note beginning on April 1, 2009.
On November 6, 2009, Chase commenced a mortgage foreclosure action against the defendant and others by the filing of a summons and complaint in the Supreme Court (hereinafter the first action). Chase alleged in paragraph 9 of the complaint that the named defendants defaulted on their payment obligations under the note and mortgage by failing to make the payment that had become due on April 1, 2009. In paragraph 11 of the complaint, it was alleged that Chase "elected and does hereby elect to declare the entire principal balance [of the note] to be due and owing." Later, according to an eCourts printout contained in the record, Chase moved to discontinue the first action, and the motion was granted in an order dated October 15, 2013.
In a summons with notice and complaint filed on November 10, 2015, Christiana [*2]Trust, a Division of Wilmington Savings Fund Society, FSB, as trustee for Normandy Mortgage Loan Trust, Series 2013-18 (hereinafter the plaintiff), commenced an action against the defendant and others to foreclose the mortgage on the subject property (hereinafter the second action). The plaintiff alleged that it was the holder of the note and the assignee of the mortgage, and that the defendant was in default of his payment obligations. Paragraph III(E) of the complaint alleged that the plaintiff "elected to and hereby accelerate[s] the mortgage and declare[s] the entire mortgage indebtedness immediately due and payable."
On March 10, 2016, the defendant moved pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against him on the ground that the second action was time-barred and to cancel a lis pendens that had been filed against the subject property. The defendant argued that since the first action was commenced on November 6, 2009, and accelerated the full amount due on the note at that time, the second action, commenced on November 10, 2015, was commenced beyond the six-year statute of limitations of CPLR 213(4) and was therefore untimely. In opposition, the plaintiff argued, inter alia, that the discontinuance of the first action without prejudice, which occurred within six years of that action's acceleration of the full balance due on the note, operated as a de-acceleration of the debt. The plaintiff further argued that the discontinuance of the first action "leaves the situation as if the action had never been filed" (internal quotation marks omitted), in effect erasing the acceleration of the debt which occurred when the first action was commenced on November 6, 2009. The plaintiff concluded that the commencement of the second action on November 10, 2015, constituted a new acceleration rendering the second action timely.
In the order appealed from, dated September 7, 2017, the Supreme Court, inter alia, denied the defendant's motion. The court agreed with the plaintiff that when the first action was discontinued, everything that had occurred within that action, including Chase's acceleration of the loan debt, was annulled. The court concluded that since the first action had been voluntarily discontinued by Chase, that affirmative act revoked the 2009 acceleration of the debt, and the debt acceleration of the second action in 2015 was therefore timely.
For the reasons we discuss below, we reverse the order insofar as appealed from.
II. The Effect of De-acceleration Upon the Statute of Limitations
The parties do not dispute that the controlling statute of limitations for breach of contract actions is six years (see CPLR 213[4]; Milone v US Bank N.A.,
Two years ago, this Court addressed similar issues in Milone v US Bank N.A. (
On March 10, 2015, after the six-year statute of limitations had expired as measured from the initial debt acceleration, the borrower in Milone commenced an action pursuant to RPAPL 1501 to cancel and discharge the mortgage and note, arguing that no new foreclosure action had been commenced on the note within six years from its acceleration. The lender moved to dismiss the complaint in the RPAPL 1501 action on the ground that since a de-acceleration of the loan balance had occurred within six years of the acceleration, there was no violation of the statute of limitations and a new six-year limitations period would only begin to run if the full balance of the same note were to be accelerated at some time in the future (see Milone v US Bank N.A.,
This Court used the occasion in Milone to sort out the law and procedures governing the acceleration and de-acceleration of notes. We recognized well-established precedent that lenders may revoke the acceleration of full mortgage loan balances, so long as the revocation is accomplished by an affirmative act occurring within six years of the earlier acceleration (see id. at 154, citing Deutsche Bank Natl. Trust Co. v Adrian,
"[A] de-acceleration letter is not pretextual if . . . it contains an express demand for monthly payments on the note, or, in the absence of such express demand, it is accompanied by copies of monthly invoices transmitted to the homeowner for installment payments, or is supported by other forms of evidence demonstrating that the lender was truly seeking to de-accelerate and not attempting to achieve another purpose under the guise of de-acceleration" (id. at 154, citing Deutsche Bank Natl. Trust Co. Ams. v Bernal,56 Misc 3d 915 , 923-924 [Sup Ct, Westchester County, Scheinkman, J.]).
The Milone case involved a de-acceleration letter from a servicer that clearly and unambiguously demanded a resumption of monthly installment payments on the note. Here, by contrast, we are faced not with a letter of de-acceleration, but a discontinuance of the first action, which had sought full payment of the accelerated debt. Beyond Milone, this Court has repeatedly held that a lender's mere act of discontinuing an action, without more, does not constitute, in and of itself, an affirmative act revoking an earlier acceleration of the debt (see Bank of N.Y. Mellon v Yacoob, ___ AD3d ___,
The reason for requiring that a valid de-acceleration requires more than a bare discontinuance of a foreclosure action is that the full balance of a mortgage debt cannot be sought without an acceleration, whereas the voluntary discontinuance of a foreclosure action may be [*4]occasioned for any number of different reasons, including those that have nothing to do with an intent to revoke the acceleration. A bare discontinuance does not disclose its underlying reasons nor say anything about the discontinuing party's intent to de-accelerate the full debt.
There are sound legal and public policy reasons in requiring that a lender or servicer, upon de-accelerating a loan balance, demonstrate its good-faith and bona fide intentions in rescinding its demand for the full loan balance and in seeking a resumption of monthly installment payments. Once a mortgage debt is accelerated, the borrower's right and obligation to make monthly installments ceases and all sums and penalties become immediately due and payable (see Federal Natl. Mtge. Assn. v Mebane,
Here, the plaintiff did not submit to the Supreme Court, and hence could not include in the appellate record (see CPLR 5526; Matter of Dondi,
Our developed law that the discontinuance of residential mortgage foreclosure actions is not tantamount to an automatic de-acceleration of the full loan debt is further buttressed by the fact that these actions are not only creatures of contract law. Mortgage foreclosure actions are not purely contractual, but are a unique hybrid of contract (the note) and equity (foreclosure on the premises and eviction of the homeowner). " A foreclosure action is equitable in nature and triggers the equitable powers of the court'" (Onewest Bank, FSB v Kaur,
Moreover, the acceleration of a debt in a residential mortgage foreclosure action survives a simple discontinuance of the action, because the right to exercise an acceleration independently arises from the provisions of the note between the parties, and not from the existence of the potential judicial remedies of the court. In other words, the mere discontinuance of an action is not tantamount to a withdrawal of the acceleration itself, but merely withdraws the prayer that the court assist the lender in collecting the accelerated amount. The right to collect the full debt, once accelerated, exists under paragraph 7(c) of the parties' note independent of the lawsuit unless, as we have previously held, a de-acceleration is clearly and unambiguously communicated to the borrower as such. To the extent our dissenting colleague suggests that the discontinuance of an action withdraws all requests for relief, including any demand for recovering the accelerated debt, citing Loeb v Willis (
Indeed, as noted by the Court of Appeals, "[t]he fact of election [to accelerate a mortgage debt] should not be confused with the notice or manifestation of such election" (Albertina Realty Co. v Rosbro Realty Corp.,
Here, since Chase accelerated the loan balance by commencing the first action on November 6, 2009, and the second action was not commenced until November 10, 2015, the defendant met his initial burden of demonstrating, prima facie, that the second action is time-barred by operation of CPLR 213(4) and 3211(a)(5) by four days (see HSBC Bank USA, N.A. v Gold,
III. The Interplay of CPLR 204(a) and RPAPL 1304
The plaintiff argues that the second action is timely pursuant to CPLR 204(a) because [*6]the 90-day period required for mailing a statutory notice of default under RPAPL 1304 operates as a toll of the statute of limitations for that same period of time. Although the plaintiff's argument is raised for the first time on appeal, we are able to reach it since it is an issue of law which appears on the face of the record and could not have been avoided had it been raised before the Supreme Court (see Countrywide Bank, FSB v Singh,
The notice period of RPAPL 1304 does not operate to toll the statute of limitations. CPLR 204(a) authorizes the tolling of a statute of limitations where the commencement of an action is stayed by a court order or by a statutory prohibition (see Torsoe Bros. Constr. Corp. v McKenzie,
IV. Miscellaneous
In light of our determination to grant that branch of the defendant's motion which was to dismiss the complaint insofar as asserted against him, we also grant that branch of the defendant's motion which was to cancel the lis pendens that had been filed against the subject property (see Gallagher Removal Serv. v Duchnowski,
The parties' remaining contentions are without merit or have been rendered academic by other aspects of this opinion and order.
In light of the foregoing, the order is reversed insofar as appealed from, on the law, and the defendant's motion pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against him as time-barred and to cancel the lis pendens filed against the subject property is granted.
SCHEINKMAN, P.J., and LEVENTHAL, J., concur.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the motion of the defendant Himon Barua pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against him as time-barred and to cancel a lis pendens filed against the subject property is granted.
MILLER, J., concurs in part and dissents in part, and votes to modify the order, on the law, by deleting the provision thereof denying that branch of the motion of the defendant Himon Barua which was pursuant to CPLR 3211(a)(5) to dismiss so much of the complaint as sought to recover damages for any unpaid installments that were due prior to November 10, 2009, insofar as asserted against him, and substituting therefor a provision granting that branch of the motion, and, as so modified, to affirm the order insofar as appealed from, with the following memorandum:
It is rare, given the centuries of jurisprudence upon which we may draw, for a court to encounter a truly novel legal issue. This is especially true when legal issues arise from a well-developed practice area such as contract law. When legal precedent is available, it should be applied in accordance with the doctrine of stare decisis. That doctrine, among other things, "reassures the public that our decisions arise from a continuum of legal principle rather than the personal caprice of the members of [a] Court" (People v Peque,
In this case, we are urged to announce and extend an entirely new set of legal rules [*7]to govern the issues that have arisen in this relatively straightforward mortgage foreclosure action. The issues implicated by this case are not new, however, and the legal precedents that have developed to address these situations should not be so lightly cast aside with vague references to "equity" or through the invocation of one-sided hypotheticals that have no bearing on the facts of this case.
Instead of restoring clarity and predictability, the decision to ignore precedent will foster additional confusion in this important area of the law. And while the public policy views underlying the decision to create these new rules are no doubt laudable, they are realized here without any legislative basis, and at the expense of the parties' contract. Accordingly, and for the reasons that follow, I must respectfully dissent in part.
1. Factual and Procedural Background
With summons and notice dated August 5, 2015, and filed November 10, 2015, the plaintiff, Christiana Trust, commenced this action to foreclose a mortgage. The complaint alleged that the defendant Himon Barua (hereinafter the borrower) executed a note in the sum of $312,000 in favor of the defendant JPMorgan Chase Bank, N.A. (hereinafter Chase). The complaint alleged that the borrower defaulted under the terms of the note by failing to make required monthly payments beginning with the payment due on April 1, 2009, and "each subsequent month thereafter." The complaint alleged that in light of the borrower's default, the plaintiff was electing to accelerate the mortgage debt and declare the entire indebtedness immediately due and payable. The plaintiff sought a judicial sale of the property to satisfy the amounts due under the terms of the note and, if necessary, a deficiency judgment against the borrower.
There is no indication in the record that the borrower has ever interposed an answer in response to the complaint. In any event, with notice dated March 10, 2016, the borrower moved, inter alia, pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against him on the ground that the action is barred by the statute of limitations. In support of his motion, the borrower submitted, inter alia, a complaint in a prior foreclosure action that had been commenced by Chase in 2009 (hereinafter the 2009 action), and an eCourts printout indicating that the prior action had been discontinued by Chase sometime in 2013. The borrower argued that Chase had unequivocally elected to accelerate the mortgage debt by commencing the 2009 action, and that the present action was time-barred by virtue of the fact that it had been commenced more than six years later.
The plaintiff opposed the borrower's motion. The plaintiff argued that the motion was not properly before the court because the borrower had defaulted in this action and had failed to set forth a reasonable excuse for his default. In any event, the plaintiff contended that the voluntary discontinuance in the 2009 action constituted a revocation of Chase's election to accelerate the mortgage debt and foreclose the mortgage.
In an order dated September 7, 2017, the Supreme Court, among other things, denied the borrower's motion, inter alia, to dismiss the complaint insofar as asserted against him pursuant to CPLR 3211(a)(5). The court noted that, generally, the holder of a note is entitled to revoke its election to accelerate a mortgage debt so long as it does so within six years of the acceleration, i.e., before the six-year statute of limitations period has run. The court determined that, in this case, Chase had revoked its election to accelerate the mortgage debt and foreclose the mortgage by voluntarily discontinuing the 2009 action, which had been effected in an order dated October 15, 2013. In light of the evidence that Chase had revoked its election to accelerate the mortgage debt less than six years prior to the commencement of the instant action, the court concluded that the instant action was timely commenced.
The borrower appeals from the Supreme Court's order. On appeal, the borrower contends that the court erred in denying his motion, inter alia, to dismiss the complaint insofar as asserted against him as time-barred. The borrower contends that Chase's voluntary discontinuance of the 2009 action did not constitute an affirmative act revoking Chase's election to accelerate the mortgage debt and foreclose the mortgage. In response, the plaintiff contends that, in accordance with this Court's case law, the court properly denied the borrower's motion since the evidence that Chase voluntary discontinued the 2009 action raised a question of fact as to whether Chase revoked its election to accelerate the mortgage debt and foreclose the mortgage.
2. Legal Analysis
The statute of limitations is an affirmative defense (see CPLR 3018[b]). At a trial, "[t]he defendant interposing the Statute of Limitations as an affirmative defense has the burden of [*8]proving its applicability" (Connell v Hayden,
"[T]he Statute of Limitations is generally viewed as a personal defense" (John J. Kassner & Co. v City of New York,
The CPLR authorizes "[a] party [to] move for judgment dismissing one or more causes of action asserted against [them] on the ground that . . . the cause of action may not be maintained because of . . . [a] statute of limitations" (CPLR 3211[a][5]). "In resolving a motion to dismiss pursuant to CPLR 3211(a)(5), the court must accept the facts as alleged in the complaint as true, and accord the plaintiff the benefit of every possible favorable inference" (U.S. Bank N.A. v Gordon,
"To dismiss a cause of action pursuant to CPLR 3211(a)(5) on the ground that it is barred by the applicable statute of limitations, a defendant bears the initial burden of demonstrating, prima facie, that the time within which to commence the action has expired" (Stewart v GDC Tower at Greystone,
As relevant here, "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" (CPLR 213[4]). "The time within which an action must be commenced, except as otherwise expressly prescribed, shall be computed from the time the cause of action accrued to the time the claim is interposed" (CPLR 203[a]; see Hahn Automotive Warehouse, Inc. v American Zurich Ins. Co.,
Generally, "[a] cause of action does not accrue until its enforcement becomes possible" (Jacobus v Colgate,
Since nominal damages are always available to enforce the promises given in a contract (see Kronos, Inc. v AVX Corp.,
Where, as here, the alleged breach is a default in the making of a monthly installment payment, a separate breach occurs for each installment that is not paid, and the statute of limitations begins to run on each cause of action "on the date each installment becomes due" (Wells Fargo Bank, N.A. v Burke,
Accordingly, an action may generally be brought on each unpaid installment within six years of the time it matured or became due (see 1 Bergman on New York Mortgage Foreclosures § 5.11[2] [2020]). Conversely, and without more, "recovery is barred for installments due more than six years before the mortgage foreclosure action was commenced" (id.).
In this case it is clear, based on the factual allegations in the complaint alone, that the statute of limitations bars recovery of a portion of the damages sought in this action. As previously indicated, this action was commenced with the filing of the summons with notice on November 10, 2015 (see CPLR 304[a]; see also CPLR 2102). The complaint specifically seeks to recover damages for unpaid installments that were due beginning on April 1, 2009—more than six years before this action was interposed. The borrower's submissions established, prima facie, that recovery is time-barred for any unpaid installments that were due prior to November 10, 2009—to wit, from the installment due on April 1, 2009, up to and including the installment due on November 1, 2009 (see CPLR 203[a]; 213[4]; see also General Construction Law § 20).
In response to the borrower's motion, the plaintiff failed to raise a question of fact as to whether the action was timely with respect to any unpaid installments that were due before November 10, 2009. The plaintiff did not address the fact that, on its face, the complaint seeks to recover payments that were due more than six years before this action was commenced. Accordingly, the Supreme Court should have granted the borrower's motion to the extent of dismissing so much of the complaint as sought to recover damages for any unpaid installments that were due prior to November 10, 2009, insofar as asserted against him (see e.g. Elia v Perla,
The borrower contends that the plaintiff is also barred from recovering damages for any unpaid installments that were due less than six years prior to the commencement of this action, as well as barred from recovering damages for installments that have not yet come due under the terms of the parties' agreements. Notably, in this regard, the borrower agreed in the note to make monthly installment payments until August 1, 2036.
The borrower contends that, upon his default, Chase validly exercised its option to accelerate the maturity of the entire unpaid portion of the mortgage debt. Since this acceleration occurred more than six years prior to the commencement of this action, the borrower contends that the statute of limitations has run on the entire unpaid portion of the mortgage debt, and that the Supreme Court should have granted dismissal of the entire complaint as time-barred.
"[E]ven if a mortgage is payable in installments, the terms of the mortgage may contain an acceleration clause that gives the lender the option to demand due the entire balance of principal and interest upon the occurrence of certain events delineated in the mortgage'" (Bank of N.Y. Mellon v Dieudonne,
A lender's right to accelerate a mortgage debt does not arise from the common law or a statute, but from the terms of the parties' agreement. Accordingly, the specific terms of each note and mortgage dictate the circumstances under which a holder may demand due the entire balance of principal and interest (cf. Real Property Law § 254[2]). Generally speaking, the holder's option to accelerate the mortgage debt becomes operable when the borrower commits what amounts to a material breach of the parties' agreement, as defined in the agreement itself (cf. Awards.com v Kinko's, Inc.,
Thus, it has been recognized that "an acceleration clause . . . is merely a device . . . intended to secure the [borrower's] obligation to perform a material element of the bargain" (Fifty States Mgt. Corp. v Pioneer Auto Parks,
The decision of whether to exercise an option to accelerate a mortgage debt in response to a qualifying breach constitutes the election of a remedy. Until the holder affirmatively elects to take advantage of the option to accelerate the mortgage debt, "[it] has no operation" (Wells Fargo Bank, N.A. v Burke,
As a general matter, in order to constitute a valid election to accelerate, the entity making the election must have the contractual authority, or "standing," to make the election, and that authority must be exercised in accordance with the terms of the note and mortgage (Milone v US Bank N.A.,
"Where the acceleration of the maturity of a mortgage debt on default is made optional with the holder of the note and mortgage, some affirmative action must be taken evidencing the holder's election to take advantage of the accelerating provision" (Wells Fargo Bank, N.A. v Burke,
In commencing an action to enforce the terms of a note, the holder must set forth the remedy it seeks for the alleged breach. Where the plaintiff is the holder of both the note and mortgage, it must first elect whether to proceed "at law in a suit on the debt as evidenced by the note [or] in equity to foreclose the mortgage" (Copp v Sands Point Mar.,
If the holder elects to foreclose the mortgage, it must choose whether to foreclose the entire mortgage debt or proceed with a "partial foreclosure" (Golden v Ramapo Improvement Corp.,
If the holder of a note and mortgage elects to foreclose a portion of the mortgage debt that has not yet come due, it must necessarily exercise its option to accelerate the maturity of that portion of the debt. Under such circumstances, proper service of a pleading setting forth an election to foreclose the entire mortgage debt will ordinarily be sufficient "to put the borrower on notice that the option to accelerate the debt has been exercised" (Wells Fargo Bank, N.A. v Burke,
However, "[e]ven if the bringing of an action for one remedy is a manifestation of choice of that remedy, it does not preclude the plaintiff from shifting to another remedy as long as the defendant has not materially changed his [or her] position" (Restatement [Second] of Contracts § 378, Comment a; see 12 Corbin on Contracts § 66.6). Put another way, "a binding election occurs only where an estoppel is created" (12 Corbin on Contracts § 66.7 n 3, citing Twentieth Century-Fox Film Corp. v National Publs., Inc.,
Accordingly, even after the holder of a note and mortgage has elected to accelerate the entire mortgage debt, the holder retains the right to "revoke its election to accelerate . . . provided that there is no change in the borrower's position in reliance thereon" (Federal Natl. Mtge. Assn. v Mebane,
Since a valid acceleration gives the holder the immediate right to the accelerated portion of the mortgage debt, the statute of limitations begins to run on that portion of the debt from the date of the acceleration (see Wells Fargo Bank, N.A. v Burke,
The holder "may revoke its election to accelerate the mortgage, but it must do so by an affirmative act of revocation" within six years after the election to accelerate was validly made (NMNT Realty Corp. v Knoxville 2012 Trust,
Here, in support of his motion to dismiss pursuant to CPLR 3211(a)(5), the borrower submitted, inter alia, the complaint from the 2009 action. As the borrower correctly contends, in its complaint in the 2009 action, Chase sought to recover the entire outstanding principal sum of the mortgage debt and unequivocally elected to accelerate that debt. Without more, the submission of the complaint in the 2009 action alone would have been sufficient to establish, prima facie, that the present action is time-barred, as it had been commenced more than six years after an acceleration of the entire mortgage debt had occurred (see Albertina Realty Co. v Rosbro Realty Corp.,
However, the borrower's submissions also included evidence indicating that Chase discontinued the 2009 action sometime in 2013. As the Supreme Court in this case properly concluded, the voluntary discontinuance of the 2009 action by Chase constituted formal and unequivocal notice that it was withdrawing its complaint and all of the requests for relief contained therein (see Mahon v Remington,
Inasmuch as the complaint in the 2009 action constituted the only evidence in the record showing that Chase had ever demanded the immediate payment of the entire mortgage debt, evidence showing that it had been affirmatively withdrawn by Chase in connection with a voluntary discontinuance raised a question of fact as to whether Chase revoked its election to accelerate (see NMNT Realty Corp. v Knoxville 2012 Trust,
Under the circumstances, since the borrower submitted this evidence of the voluntary discontinuance in support of his motion, he failed to sustain his initial burden of eliminating all questions of fact as to whether the entire action is time-barred (see U.S. Bank N.A. v Gordon,
My colleagues in the majority, relying on recent pronouncements from this Court, conclude that the evidence that Chase formally and affirmatively withdrew its only demand for the full payment of the debt was insufficient to raise a question of fact as to whether Chase revoked its [*11]election to accelerate. The cases relied upon my colleagues appear to be the product of judicial drift, as they fail to articulate any applicable legal theory, much less legal authority, to support their deviation from this Court's prior precedent. In order to provide perspective on this issue, it is necessary to review this Court's prior case law in this area.
In Golden v Ramapo Improvement Corp. (
In Federal Natl. Mtge. Assn. v Mebane (
This Court adhered to this principle in a number of subsequent determinations (see Kashipour v Wilmington Sav. Fund Socy., FSB,
This Court first addressed the issue presented on this appeal in NMNT Realty Corp. v Knoxville 2012 Trust (
However, this Court determined that, in opposition to the plaintiff's showing, the holder of the note and mortgage raised a triable issue of fact as to whether it's predecessor in interest had revoked its election to accelerate the mortgage debt (see id.). In reaching this conclusion, this Court cited to evidence that the holder's predecessor in interest had "moved for, and . . . was granted, an order that discontinued the foreclosure action" (id.). This Court distinguished cases where the prior foreclosure action was never withdrawn by the lender, but rather, dismissed by the court, since, in those cases, there was no affirmative act by the lender to show that it had revoked its election to accelerate (see id.). This Court also rejected evidence from the original mortgagors that the " Order of Discontinuance was the result of procedural deficiencies in the proceedings,'" finding that such allegations "do not disprove an affirmative act of revocation" (id.).
This Court's determination in NMNT Realty Corp. v Knoxville 2012 Trust (
Moreover, as recently as last year, "ten of the thirteen New York trial courts that have considered this issue have found that [w]ithdrawing the prior foreclosure action is an affirmative act of revocation that tolls the statute of limitations" (U.S. Bank Trust, N.A. v Adhami,
In Freedom Mtge. Corp. v Engel (
The new evidentiary burden imposed in Freedom Mtge. Corp. v Engel (
Inasmuch as there is no basis to require the plaintiff to establish, as a matter of law, that this action is timely, there is no basis to require the production of evidence that would conclusively establish that the plaintiff formally agreed to continue to accept prospective monthly payments (cf. Connell v Hayden,
In the wake of Freedom Mtge. Corp. v Engel (
Although never fully explained, the heightened evidentiary burden imposed by this Court in Freedom Mtge. Corp. v Engel (
This notion, that an otherwise valid revocation may be rendered invalid based on the subjective motivations of the lender, finds no support in the case law and is at odds with well-established principles of contract law. The Court of Appeals has expressly considered the limitations on the right of a lender to revoke its election to accelerate a mortgage debt, and has applied the well-established equitable principles of estoppel to this situation (see Kilpatrick v Germania Life Ins. Co.,
To the contrary, this Court has already recognized the circumstances under which equity may intervene: "only if a mortgagor can show substantial prejudice will a court in the exercise of its equity jurisdiction restrain the [holder] from revoking its election to accelerate" (Golden v Ramapo Improvement Corp.,
Inasmuch as existing principles of equity serve to protect a borrower from the misuse of a contractual right (see First Union Natl. Bank v Tecklenburg,
Here, the borrower has not alleged that Chase or any subsequent holder continued to demand the immediate payment of the entire mortgage debt after it discontinued the 2009 action, or that it otherwise refused to accept any tendered monthly installment payments. Nor is there any evidence in the record indicating that Chase engaged in any such conduct.
Rather, the evidence in the record shows that Chase formally and affirmatively withdrew its only demand for the immediate payment of the entire mortgage debt. This evidence is relevant because it has a tendency to make it more likely that Chase had revoked its election to accelerate to pursue a different remedy than the one it sought in the withdrawn complaint (see generally Guide to NY Evid rule 4.01, Relevant Evidence; 1 McCormick on Evidence § 185 [8th [*14]ed 2020]). Accordingly, the order should be modified by deleting the provision thereof denying that branch of the borrower's motion which was pursuant to CPLR 3211(a)(5) to dismiss so much of the complaint as sought to recover damages for any unpaid installments that were due prior to November 10, 2009, insofar as asserted against him, and substituting therefor a provision granting that branch of the borrower's motion, and, as so modified, the order should be affirmed.
ENTER:Aprilanne Agostino
Clerk of the Court
Footnote 1:The number of reported appellate cases holding that the mere discontinuance of an action does not singularly qualify as a clear and unambiguous repudiation of a prior debt acceleration are now quite numerous—so numerous, in fact, that NMNT Realty Corp. v Knoxville 2012 Trust (