The following papers numbered 1 through 5 were read on Defendants’ motion for an order vacating the Judgment of Foreclosure and Sale herein and dismissing Plaintiff’s action: Notice of Motion — Affirmation 1-2 Affirmation in Opposition/Exhibits — Memorandum 3-4 Reply Affirmation 5 Upon the foregoing papers it is ORDERED that the motion is disposed of as follows: This is the second of two actions to foreclose a residential mortgage in the principal sum of $405,000 on premises owned by defendants Kathryn and Ronald Madden. A prior foreclosure action, entitled HSBC Bank USA Nat’l Assn. v. Madden, was commenced in this Court on October 5, 2012 under Index No. 2731/2012. The Maddens moved pursuant to CPLR §3211(a)(3) to dismiss the complaint therein based on the plaintiff’s lack of standing. By Decision and Order dated September 6, 2016, this Court (Hon. Paul I. Marx, J.) held that “Plaintiff lacked standing to commence this action” and granted the Maddens’ application to dismiss the complaint. The present foreclosure action was commenced on August 29, 2019. The Maddens moved for dismissal on the ground that it was barred by the statute of limitations, as more than six (6) years had passed since the purported acceleration of the mortgage debt in the first action. By prior Decision and Order dated September 8, 2021, the Court denied the motion, holding: [I]f a party did not have standing to commence an action in the first instance, no acceleration can have occurred (see Wells Fargo Bank, N.A. v. Burke, 94 AD3d at 983). Here, because the prior action was dismissed for lack of standing, the loan was not accelerated. As such, the purported acceleration in 2012 was a nullity and the six-year statute of limitations did not begin to run on the entire debt (see EMC Mtge. Corp. v. Suarez, 49 AD3d 592, 593 [2d Dept. 2008]). As such, the current action is not time barred. The Maddens thereafter defaulted in answering. By prior Decision and Order dated August 1, 2022, the Court awarded Plaintiff a default judgment, Order of Reference and other relief. A Judgment of Foreclosure and Sale was issued on November 15, 2022. So far as the Court is aware, a foreclosure sale has not as yet occurred. On December 30, 2022, the Governor signed the “Foreclosure Abuse Prevention Act.” The legislative committee report (2021 NY A.B. 7737 [NS]) states in pertinent part: The legislature finds that there is an ongoing problem with abuses of the judicial foreclosure process and lenders’ attempts to manipulate statutes of limitations; that the problem has been exacerbated by recent court decisions which, contrary to the intent of the legislature, have given mortgage lenders and loan servicers opportunities to avoid strict compliance with remedial statutes and manipulate statutes of limitation to their advantage; and that the purpose of the present legislation is to clarify the meaning of existing statutes, and to rectify these erroneous judicial interpretations thereof. Accordingly, this bill amends certain statutes and rules to clarify the existing law and overturn certain court decisions to ensure the laws of this state apply equally to all litigants, including those currently involved in mortgage foreclosure actions, in order to ensure that parties purporting to sue on mortgage debt are bound by the same statutes of limitations that bind all other litigants. The aim of the bill is to thwart and eliminate abusive and unlawful litigation tactics that have been adopted and pursued in mortgage foreclosure actions to manipulate the law and judiciary to yield to expediency and the convenience of mortgage banking and servicing institutions at the expense of finality and repose that statutes of limitations are meant to insure. To that end, the Legislature amended CPLR §213(4), the statute of limitations governing mortgage foreclosure actions, “to clarify the relevant accrual periods for actions upon a mortgage and note.” See, 2021 NY A.B. 7737 (NS). New subparagraph (a) provides: In any action on an instrument described under this subdivision, if the statute of limitations is raised as a defense, and if that 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. The Maddens now move based on the Foreclosure Abuse Prevention Act for an order vacating the Judgment of Foreclosure and Sale herein and dismissing Plaintiff’s action. They contend that by reason of amended CPLR §213(4)(a), plaintiff Wilmington Savings is estopped from asserting that the mortgage at issue here was not validly accelerated as a result of the prior 2012 foreclosure action. Wilmington contends that the statutory estoppel is inapplicable because Judge Marx’s 2016 dismissal of the 2012 action on the grounds that the plaintiff lacked standing to commence a foreclosure action is tantamount to a determination that the mortgage debt “was not validly accelerated” within the meaning of Section 213(4)(a). The Maddens insist to the contrary that the Legislature’s purpose in amending CPLR §213(4) was to overcome the line of decisions including EMC Mtge. Corp. v. Suarez (cited by this Court in denying their prior application to dismiss this action as time barred), (Reply Aff. 3) and argue: The underlying concept is that acceleration is divorced completely from standing; unless both the defense motion and the court decision cite some impropriety with the acceleration separate and apart from the lack of standing (which is not the case here), the Statute of Limitations started when the failed case was filed and continues to run unabated. (Reply Aff. 5) The Court is aware of no published decisions construing CPLR §213(4) as amended. The issue presented appears to be one of first impression. LEGAL ANALYSIS To promote greater certainty in ascertaining the accrual date of claims sounding in foreclosure and prevent what it regarded as lenders’ manipulation of the statute of limitations “at the expense of finality and repose that statutes of limitations are meant to insure,” the Legislature amended CPLR §213(4)(a) to limit the right of lenders like Wilmington Savings to avoid a statute of limitations defense by challenging the validity of an acceleration of the mortgage debt in a prior foreclosure action. Nevertheless, as applied here, the statute specifically preserves Wilmington’s right to assert that the Maddens’ mortgage debt was not validly accelerated in the 2012 mortgage foreclosure action provided that the 2016 dismissal of that action was (a) based on an expressed judicial determination, (b) made upon a timely interposed defense, (c) that “the instrument was not validly accelerated.” According to the Maddens, the statutory estoppel applies unless in the prior action the mortgagors specifically attacked the validity of the acceleration (not the plaintiff’s standing) and the court dismissed the action not for lack of standing but because on other grounds the acceleration was invalid. However, the Maddens’ notion that a lender’s standing to foreclose and the validity of its acceleration of the mortgage debt incident to the foreclosure action are mutually exclusive concepts cannot be sustained, for a lack of standing necessarily imports the invalidity of the acceleration of the mortgage debt; indeed, lack of standing renders a foreclosing plaintiff’s purported acceleration a nullity. “An acceleration of a mortgage debt can occur when a creditor commences an action to foreclose upon a note and mortgage and seeks, in the complaint, payment of the full balance due.” 21st Mortgage Corporation v. Rudman, 201 AD3d 618, 621 (2d Dept. 2022); J & JT Holding Corp. v. Deutsche Bank Nat’l Trust Co., 173 AD3d 704, 707 (2d Dept. 2019). However, it is hornbook law that “service of a complaint is ineffective to constitute a valid exercise of the option to accelerate a debt where the plaintiff does not have the authority to accelerate the debt or to sue to foreclose at that time.” 21st Mortgage Corporation v. Rudman, supra; J & JT Holding Corp. v. Deutsche Bank Nat’l Trust Co., supra; MLB Sub I, LLC v. Grimes, 170 AD3d 992, 993 (2d Dept. 2019); Wells Fargo Bank, N.A. v. Burke, 94 AD3d 980, 983 (2d Dept. 2012). See, EMC Mortgage Corporation v. Suarez, 49 AD3d 592, 593 (2d Dept. 2008). Accordingly, where a foreclosure action is dismissed for lack of standing, the purported acceleration of the mortgage debt is a nullity and does not start the six-year statute of limitations running on the entire mortgage debt. See, id. The Maddens’ further argument that in amending CPLR §213(4) the Legislature intended to overcome EMC Mortgage Corporation v. Suarez and its progeny is unpersuasive. Parsed in a vacuum the statutory language might bear the construction for which the Maddens advocate, but it is difficult even to conceive of cases where dismissal would eventuate purely on account of an invalid acceleration independent of the foreclosing party’s lack of standing. One would have to postulate a case where, for instance, a lender with standing to foreclose accelerated the debt in violation of the terms of the mortgage or attempted to foreclose even though the mortgagors had not defaulted on their obligations under the mortgage. While theoretically possible, such misconduct is vanishingly rare and certainly does not represent the kind of “foreclosure abuse” for which the remedies of the Foreclosure Abuse Prevention Act were enacted. Standing, on the other hand, is endlessly litigated in foreclosure cases. Moreover, it is inextricably bound up with the validity of an acceleration of the mortgage debt, for, as shown above, lack of standing renders a foreclosing plaintiff’s purported acceleration a nullity. Thus, any uncertainty about a foreclosing party’s standing in a prior foreclosure action implicates the accrual date of the cause of action in a subsequent action on the same mortgage and renders uncertain the application of the statute of limitations. “To clarify the relevant accrual periods for actions upon a mortgage and note” the Legislature amended CPLR §213(4) to limit a lender’s right to challenge the validity of the acceleration of the mortgage debt in a prior foreclosure action. The mischief which the Legislature addressed therein arises when foreclosure actions are sequentially commenced, the standing of the foreclosing party in the first action is never addressed, and the foreclosing party in the second action belatedly challenges the validity of the acceleration in the first action in an effort to avoid the statute of limitations. The problem is succinctly described in Justice Barros’ opinion in 21st Mortgage Corporation v. Rudman, supra: …[W]here a prior action has been dismissed by a court for lack of standing [cit.om.] or discontinued for lack of standing [cit.om.], this Court has determined that the statute of limitations did not begin to run upon commencement of those actions. In those two scenarios — a dismissal or a discontinuance — the defendant has successfully argued lack of standing, or the plaintiff has taken the unequivocal act of voluntarily discontinuing the action [cit.om.]. In contrast to those scenarios, here, the plaintiff seeks to now litigate the issue of its predecessor’s standing in the 2006 action in order to avoid the statute of limitations. This raises various substantive and procedural issues, including whether a plaintiff should be judicially estopped from challenging its predecessor’s standing where, as here, the issue of standing was never determined or even called into question in the prior action, and whether it is even proper for a plaintiff to select documentation that was never introduced in the prior action to challenge its predecessor’s standing. Conducting a historical reconstruction of a predecessor’s standing, wherein courts are presented with documents that are generally unreliable incases commenced and resolved years ago, makes it so that the timeliness issue cannot be ascertained with any degree of certainty [cit.om.]. 21st Mortgage Corporation v. Rudman, supra, 201 AD3d at 628 (Barros, J., dissenting). By amending CPLR §213(4), the Legislature effectively embraced Justice Barros’ view and estopped a foreclosing plaintiff “from challenging its predecessor’s standing where…the issue of standing was never determined or even called into question in the prior action.” See, id. Therefore, construing the statutory language that 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, the Court concludes that (1) a timely interposed challenge in the prior action to the foreclosing party’s standing, and a dismissal of that action based on a judicial determination that the plaintiff lacked standing to foreclose, is tantamount to a defense, and a determination, that the mortgage “instrument was not validly accelerated” within the meaning of CPLR §213(4)(a); and therefore (2) in such circumstances, the foreclosing party in the second action is not estopped by virtue of Section 213(4)(a) from avoiding a statute of limitations defense by asserting that the mortgage was not validly accelerated in the prior action. That construction gives full effect to the intent of the Legislature in enacting the Foreclosure Abuse Prevention Act and implementing its remedial purposes through the amendment to CPLR §213(4). It is supported by consideration of both the statutory language employed and the expression of purpose set forth in the legislative history in the context of the real-world problems the Legislature sought to address. Inasmuch as Wilmington Savings is not estopped by virtue of CPLR §213(4)(a) from challenging the validity of the acceleration of the mortgage debt in the 2012 foreclosure action, and the Maddens’ statute of limitations defense has already been definitively rejected in this action, their application for an order vacating the Judgment of Foreclosure and Sale herein and dismissing Plaintiff’s action is denied. It is therefore ORDERED, that the Defendants’ motion is denied in its entirety. The foregoing constitutes the decision and order of the Court. Dated: February 10, 2023
