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PURSUANT TO THE FORECLOSURE ABUSE PREVENTION ACT (FAPA) THE BANK IS ESTOPPED FROM CLAIMING (1) THE VOLUNTARY DISCONTINUANCE STOPPED THE RUNNING OF THE STATUTE OF LIMITATIONS, AND (2) THE DEBT WAS NOT ACCELERATED BECAUSE THE BANK DID NOT HAVE STANDING WHEN THE FORECLOSURE ACTION WAS BROUGHT (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff bank was estopped pursuant to the Foreclosure Abuse Prevention Act (FAPA) from claiming the voluntary discontinuance of the action stopped the running of the statute of limitations. The bank was also estopped by the FAPA from claiming the mortgage debt was not validly accelerated because the bank did not have standing when the foreclosure action was commenced:

… [T]he plaintiff … contends that it raised a triable issue of fact because the voluntary discontinuance of the 2008 action revoked its acceleration of the mortgage debt in that action and, thus, the instant action is timely. The plaintiff also contends that the instant action is timely because it did not have standing to commence the 2008 action, and, therefore, the mortgage debt was not validly accelerated by the commencement of that action. … [U]nder the recently enacted Foreclosure Abuse Prevention Act (… hereinafter FAPA), the voluntary discontinuance of the 2008 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'” … . Also, under FAPA, the plaintiff is estopped from asserting that the debt was not validly accelerated by the commencement of the 2008 action based on its lack of standing, and that, therefore, the instant action is timely. CPLR 213(4), as amended by FAPA, added 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, since the 2008 action was voluntarily discontinued, and therefore was not “dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated,” the plaintiff is estopped under FAPA from asserting that the debt was not validly accelerated by the commencement of the 2008 action based on the plaintiff’s lack of standing … . Deutsche Bank Natl. Trust Co. v Wong, 2023 NY Slip Op 03908, Second Dept 7-26-23

Practice Point: The Foreclosure Abuse Prevention Act precluded the bank from claiming the voluntary discontinuance stopped the running of the statute of limitations and the bank’s lack of standing when the foreclosure action was brought invalidated the acceleration of the debt.

 

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PLAINTIFF IN THIS FORECLOSURE ACTION TIMELY COMMENCED THE ACTION PURSUANT TO THE SIX-MONTH EXTENSION OF THE STATUTE OF LIMITATIONS PROVIDED BY CPLR 205-A (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the foreclosure action was timely commenced pursuant to the six-month extension of the statute of limitations provided by CPLR 205-a:

As part of the recently enacted Foreclosure Abuse Prevention Act … , a new section, CPLR 205-a, which governs the termination of certain actions, including an action upon a bond or note, the payment of which is secured by a mortgage on real property related to real property, was enacted. As relevant here, under both CPLR 205(a) and CPLR 205-a, where an action is timely commenced and is terminated for any reason other than those specified in the statutes, the plaintiff may commence a new action upon the same transaction or occurrence within six months following the termination, provided that the new action would have been timely commenced within the applicable limitations period prescribed by law at the time of the commencement of the prior action and that service upon the original defendant is completed within such six-month period … . * * *

Here, the requirements of CPLR 205-a have been satisfied. It is uncontested that the instant action, commenced within six months of termination of the 2017 action … , would have been timely commenced in 2017, and that the instant action is based on the same occurrence as the 2017 action, namely, the default on the payment obligations under the March note (see CPLR 205-a). Further, it is undisputed that the prior action was not terminated for any reason enumerated in CPLR 205-a. Sperry Assoc. Fed. Credit Union v John, 2023 NY Slip Op 03880, Second Dept 7-19-23

Practice Point: The foreclosure action was timely commenced pursuant to CPLR 205-a, the newly enacted Foreclosure Abuse Prevention Act.

 

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THE “NOTICE OF INTENT TO FORECLOSE” FELL SHORT OF AN ACCELERATION OF THE MORTGAGE DEBT AND DID NOT TRIGGER THE STATUTE OF LIMITATIONS FOR THE FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion pursuant to RPAPL 1501(4) to cancel and discharge a mortgage should not have been granted. The ground for the motion was the claim the statute of limitations for a foreclosure action had run. But the Second Department determined the “Notice of Intent to Foreclose” did not accelerate the mortgage. Therefore the statute of limitations had not begun to run:

“‘The law is well settled that, even 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'” … . 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, or through an unequivocal acceleration notice transmitted to the borrower … . A notice of acceleration of a debt must be clear and unequivocal, and to constitute such clear and unequivocal acceleration of a debt, the notice must demand an immediate payment of the entire outstanding loan and not refer to acceleration only as a future event … .

Here, the plaintiff failed to establish her prima facie entitlement to judgment on the complaint as a matter of law. The language in a 2008 “Notice of Intent to Foreclose,” that the mortgage debt would be accelerated if the borrower did not pay the arrears as set forth in the notice by September 19, 2008, was merely an expression of future intent that fell short of an actual acceleration … . Sansone v North Shore Invs. Realty Group, LLC, 2023 NY Slip Op 03876, Second Dept 7-19-23

Practice Point: Where the mortgage debt is paid in installments, the debt must be accelerated to start the statute of limitations for a foreclosure action. Here the “Notice of Intent to Foreclose” was a statement of future intention which did not accelerate the debt.

 

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THE WRONG MAILING DATE IN AN AFFIDAVIT OF SERVICE CANNOT BE CORRECTED IN AN AMENDED AFFIDAVIT; MATTER REMITTED FOR A HEARING ON DEFENDANT’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION (SECOND DEPT).

The Second Department, reversing Supreme Court and remitting for a hearing, determined a mistake in an affidavit of service of the summons and complaint (wrong mailing date) could not be corrected by an amended affidavit. Therefore a hearing on defendant’s motion to dismiss for lack of personal jurisdiction was necessary:

… [S]imilar to an erroneous address contained in an affidavit of service … , an erroneous mailing date “affects a defendant’s substantial right to notice of the proceeding against him or her, and may not be corrected by an amendment” … . Here, the second amended affidavit of service attempted to correct the admitted erroneous mailing date contained in the original affidavit of service and the first amended affidavit of service, and therefore should not have been considered … . HSBC Bank USA, N.A. v Rini, 2023 NY Slip Op 03856, Second Dept 7-19-23

Practice Point: A wrong address or a wrong mailing date in an affidavit of service cannot be corrected by an amended affidavit.

 

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A JUDICIAL FORECLOSURE SALE SHOULD BE SET ASIDE IF THERE IS DOUBT ABOUT THE TITLE (HERE SUSPICION A DEED WAS FORGED); CAVEAT EMPTOR (BUYER BEWARE) IS NOT STRICTLY APPLIED TO A JUDICIAL SALE AT AUCTION (SECOND DEPT). ​

The Second Department, reversing Supreme Court and setting aside the judicial foreclosure sale, determined the possibility a deed was forged cast suspicion on the fairness of the sale. The court noted that caveat emptor (buyer beware) is not strictly applied to a judicial sale:

“‘[A] purchaser at a judicial sale should not be compelled by the courts to accept a doubtful title,’ and, ‘if it was bad or doubtful, he [or she] should, on his [or her] application, be relieved from completing the purchase'” … .

Moreover, “[t]he rule that a buyer must protect himself [or herself] against undisclosed defects does not apply in all strictness to a purchaser at a judicial sale” … . “[A] sale of land in the haste and confusion of an auction room is not governed by the strict rules applicable to formal contracts made with deliberation after ample opportunity to investigate and inquire” … .Golden Bridge, LLC v Rutland Dev. Group, Inc., 2023 NY Slip Op 03854, Second Dept 7-19-23

Practice Point: Here the purchase of property at a foreclosure judicial sale was set aside because of suspicion a deed was forged. The doctrine of caveat emptor (buyer beware) is not strictly applied to a judicial sale.

 

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THE RIGHT TO SEEK DISMISSAL OF THE FORECLOSURE ACTION PURSUANT TO CPLR 3215 (C) BASED ON PLAINTIFF BANK’S FAILURE TO SEEK A DEFAULT JUDGMENT WITHIN A YEAR WAS WAIVED BY DEFENDANT’S THREE-YEAR DELAY IN BRINGING THE MOTION TO DISMISS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant, by waiting three years, waived the seek dismissal of the foreclosure action based on plaintiff bank’s failure to move for a default judgment within one year:

“A ‘defendant may waive the right to seek dismissal pursuant to [CPLR 3215(c)] by his or her conduct'” … . Here, the defendant did not move pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against him until nearly three years after the defendant’s attorney filed a notice of appearance on his behalf. Under these circumstances, the defendant waived his right to seek dismissal pursuant to CPLR 3215(c) by his active participation in the litigation … . Moreover, the defendant never sought to vacate his default in answering the complaint. Thus, he was precluded from raising his proffered defenses of the plaintiff’s failure to comply with RPAPL 1304 … . Bank of Am., N.A. v Carapella, 2023 NY Slip Op 03844, Second Dept 7-19-23

Practice Point: The right to dismiss an action based on plaintiff’s failure to move for a default judgment within a year of the default (CPLR 3215(c) can be waived by defendant’s participation in the action. Here defendant did not move to dismiss pursuant to CPLR 3215(c) until three years after defendant’s attorney filed a notice of appearance.

 

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ALTHOUGH DEFENDANT IN THIS FORECLOSURE ACTION DID NOT ASSERT THE AFFIRMATIVE DEFENSES OF LACK OF STANDING AND LACK OF PERSONAL JURISDICTION IN THE ANSWER, THE DEFENSES WERE NOT WAIVED AND THE MOTION TO AMEND THE ANSWER SHOULD HAVE BEEN GRANTED; EVEN THOUGH THE STATUTE PROVIDING THAT THE LACK OF STANDING DEFENSE WAS NOT WAIVED WAS NOT ENACTED AT THE TIME THE MOTION WAS DECIDED, THE APPELLATE COURT CAN APPLY THE LAW AS IT EXISTS AT THE TIME OF THE APPELLATE DECISION (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined the defendant’s failure to assert the plaintiff’s lack of standing and lack of personal jurisdiction in the answer did not waive those affirmative defenses, Defendant’s motion to amend the answer should have been granted. The court noted that even though RPAPL 1302-a, which provides that the failure to assert plaintiff’s lack of standing in the answer does not waive the defense, had not been enacted at the time the motion below was decided, the statute can be applied on appeal:

RPAPL 1302-a … provides that, notwithstanding the provisions of CPLR 3211(e), “any objection or defense based on the plaintiff’s lack of standing in a foreclosure proceeding related to a home loan, as defined in [RPAPL 1304(6)(a)], shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss.” “‘The general rule holds that an appellate court must apply the law as it exists at the time of its decision'” … . Accordingly, RPAPL 1302-a may be considered in connection with the present appeal, even though that statute had not been enacted at the time the relevant orders in this action were decided by the Supreme Court … .

… Although the defendant did not assert lack of personal jurisdiction in her answer and thereby waived this defense under CPLR 3211(e), such a defense can nevertheless be interposed in an answer amended by leave of court pursuant to CPLR 3025(b) … . Deutsche Bank Natl. Trust Co. v Groder, 2023 NY Slip Op 03768, Second Dept 7-12-23

Practice Point: Although defendant in this foreclosure action did not assert the affirmative defenses of lack of standing and lack of personal jurisdiction in the answer, the defenses were not waived and defendant should have been allowed to amend the answer accordingly.

Practice Point: An appellate court can apply the law as it exists at the time of the appellate decision, even where, as here, the relevant statute had not been enacted when the lower court issued its decision.

 

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ALTHOUGH THE STATUTE OF LIMITATIONS STARTED RUNNING WHEN THE FORECLOSURE ACTION WAS FIRST BROUGHT, THE SUBSEQUENT LOAN MODIFICATION AGREEMENT, ENTERED WHILE THE FORECLOSURE ACTION WAS STILL PENDING, STARTED THE STATUTE OF LIMITATIONS RUNNING ANEW (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that, although the six-year statute of limitations for the original foreclosure action had run, the loan modification agreement, which was entered after the foreclosure action was started and while it was still pending, restarted the statute of limitations:

RPAPL 1501(4) provides, in pertinent part, that “[w]here the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage . . . has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action . . . to secure the cancellation and discharge of record of such encumbrance.” Pursuant to General Obligations Law § 17-105, however, “a promise to pay the mortgage debt, if made after the accrual of a right of action to foreclose the mortgage . . . by the express terms of a writing signed by the party to be charged is effective . . . to make the time limited for commencement of the action run from the date of the . . . promise”… .  14 Fillm Corp. v Mid-Island Mtge. Corp., 2023 NY Slip Op 03759, Second Dept 7-12-23

Practice Point: Even if a foreclosure had been filed, starting the running of the statute of limitations, a loan modification agreement entered while the the foreclosure action was pending starts the running of the statute of limitations all over again.

 

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​IN A FORECLOSURE PROCEEDING, A REFEREE’S REPORT BASED UPON UNPRODUCED BUSINESS RECORDS SHOULD NOT BE CONFIRMED BY THE COURT (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the referee’s report in this foreclosure action should not have been confirmed because the referenced business records were not attached to the report:

“The report of a referee should be confirmed whenever the findings are substantially supported by the record, and the referee has clearly defined the issues and resolved matters of credibility” … . However, computations based on the “review of unidentified and unproduced business records . . . constitute[ ] inadmissible hearsay and lack[ ] probative value” … .

… [T]he referee’s report was improperly premised upon unproduced business records. … Therefore, the referee’s findings were not substantially supported by the record … . Nationstar Mtge., LLC v Douglas, 2023 NY Slip Op 03798, Second Dept 7-12-23

Practice Point: In a foreclosure proceeding, if the business records upon which the referee’s report is based are not produced, the court should not confirm the report because the report is not “substantially supported by the record.”

 

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THE PROOF THE FORECLOSURE NOTICE WAS MAILED IN ACCORDANCE WITH RPAPL 1304 WAS INSUFFICIENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the mortgage company in this foreclosure action did not demonstrate compliance the the notice requirements of RPAPL 1304:

… [T]he copy of the notice contains no indication that it was sent by registered or certified mail, or by first-class mail … . Nor is there “[a] copy of any United States Post Office document indicating that the notice was sent by registered or certified mail as required by the statute” … . … [The affiant] did not attest to having any personal knowledge of, or familiarity with, [the company’s] actual standard mailing procedures during the relevant time period, which were designed to ensure that items are properly addressed and mailed … . Accordingly, [the affiant’s] assertion in his affidavit that the RPAPL 1304 notice was sent to the defendant on March 14, 2013, at the address of the mortgaged premises, “by registered or certified and first-class mail,” was unsubstantiated and conclusory … . Ditech Servicing, LLC v McFadden, 2023 NY Slip Op 03452, Second Dept 6-28-23

Practice Point: Yet another instance of the failure to prove the notice of foreclosure was mailed in accordance with RPAPL 1304.

 

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