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THE MERE DISCONTINUANCE OF THE PRIOR FORECLOSURE ACTION DID NOT DE-ACCELERATE THE MORTGAGE DEBT; EXPLICIT NOTICE OF DE-ACCELERATION IS REQUIRED EITHER IN THE MOTION TO DISCONTINUE ITSELF OR IN A SEPARATE NOTICE; THEREFORE THE INSTANT FORECLOSURE ACTION IS TIME-BARRED (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Dillon, over an extensive partial dissent, determined the discontinuance of a prior foreclosure action did not, standing alone, de-accelerate the debt. Therefore the instant foreclosure action was time-barred. The Second Department noted that the plaintiff did not submit the motion papers for the discontinuance and therefore did not submit any evidence that the debt was explicitly de-accelerated in those papers, or in any other notice to the defendant. Such explicit notice is required:

A de-acceleration of the full debt revives the borrower’s right to make the monthly payments that became due between the time the loan was accelerated and the time the acceleration was revoked, together with the right to make future monthly installment payments. Since the borrower may continue to assume that its lender or servicer will not accept post-acceleration monthly payments, the lender, in order to effectively rescind the acceleration, should be required to notify the borrower that the right to make monthly payments is restored and that the lender will accept the tender of such payments … . * * *

A bare discontinuance of litigation does not nullify the fact that a contractual right to accelerate has been unilaterally exercised pursuant to the terms of a note. An acceleration of loan debt by the transmittal of a letter or by the commencement of an action in a court of law has legal implications, such as the financial penalties authorized under the note, the potential negative effect upon the borrower’s credit rating, and reliance by the borrower that monthly payments will no longer be expected or accepted and thereby prevent any pay-down of the balance owed. To occur, none of these or other consequences of an acceleration require any permission, ruling, stipulation, decision, or order of a court, as they are independent of the litigation … . Trust v Barua, 2020 NY Slip Op 03095, Second Dept 6-3-20

 

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