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YOUR NEW HOME, LLC, Plaintiff, v. JP MORGAN CHASE BANK, N.A., as Successor by Merger to Chase Home Finance, LLC and Herath Marapana, Occupant, Defendant.
This summary judgment motion raises a novel question regarding the well-settled rule that a mortgage debt is accelerated, so as to commence the running of the statute of limitations, by the filing of a complaint in a foreclosure action seeking payment of the full balance due. Specifically, this Court must decide whether that rule applies where the mortgagor died before that foreclosure action was commenced.
This action concerns a condominium unit within the complex known as Hillcrest Park Condominium Group V, located at 7E North James Street in Peekskill, New York. The mortgage that plaintiff seeks to discharge was executed on July 24, 2007 by the then unit owner, Larry McMillion, to secure a loan in the amount of $144,000 made to him by defendant JP Morgan Chase Bank, N.A. The mortgage was thereafter assigned to Chase Home Finance, LLC, effective March 25, 2008.
Larry McMillion died on December 3, 2007, at which time title to the unit passed to his heirs, consisting of his surviving spouse, Zenyth Campbell, and his children by a previous marriage, Monique McMillion-Taylor and Donell McMillion. When McMillion's surviving spouse subsequently passed away on May 12, 2009, her interest in the unit was inherited by her mother, Carrie Louise Campbell.
After McMillion's death, no further payments were made on the mortgage by anyone on his behalf, beginning with the payment due on January 1, 2008 and thereafter. Being unaware of the mortgagor's death, Chase Home Finance LLC commenced a foreclosure action against McMillion on May 2, 2008 (Supreme Court Westchester County Index No. 08-11290 [“the 2008 foreclosure action”] ). Based on the failure to name and serve McMillion's estate, that action was dismissed by decision and order dated March 26, 2010, and the lender subsequently filed a stipulation of discontinuance against the remaining defendants and canceled the notice of pendency.
On November 8, 2011, a new action was commenced by JP Morgan Chase Bank, N.A., as successor by merger to Chase Home Finance, LLC, against McMillion's heirs and the Board of Trustees of the condominium complex (Supreme Court Westchester County Index No. 58281/2011 [the 2011 foreclosure action] ). The heirs did not answer the complaint; the condominium board was the only answering defendant. No request for judicial intervention was ever filed in that action, and by documents filed on May 16, 2016, the parties stipulated to the discontinuance of the action and the cancellation of the notice of pendency. Defendant bank emphasizes that the one of the filed documents, an affirmation canceling the notice of pendency, included the statement, “the acceleration of the loan is hereby rescinded.”
While the 2011 foreclosure action was pending, on February 3, 2016, the Board commenced an action against the McMillion heirs, for unpaid common charges, fees and assessments (see Supreme Court Westchester County Index No. 51354/2016). That action was discontinued by the Board against Carrie Louise Campbell on July 27, 2016, following Campbell's April 29, 2016 transfer of her ownership interest in the unit to plaintiff as the Board's designee. It was resolved as against McMillion's children by a money judgment against Monique McMillion-Taylor on August 2, 2016 and against Donell McMillion on December 27, 2016.
On May 17, 2017, plaintiff Your New Home, LLC acquired the remaining ownership interest in the unit via quitclaim deed from Monique McMillion-Taylor and Donell McMillian. On June 26, 2018, it commenced the present action against defendant JP Morgan Chase pursuant to RPAPL Article 15, seeking a declaratory judgment quieting title and discharging defendant's 2007 mortgage. The complaint named defendant Herath Marapan as the tenant of the unit.
Plaintiff now moves for summary judgment, claiming a right to judgment discharging the 2007 mortgage as a matter of law. It contends that the six year limitations period began running when the mortgage debt was accelerated by the complaint in the first foreclosure action, on May 2, 2008, and that McMillion's death tolled the statute for only eighteen months, pursuant to CPLR 210(b), so that the bank's time to foreclose expired on November 2, 2015. It argues that the running of the statute of limitations was not affected by the disposition of either foreclosure action. Defendant opposes.
The movant's burden in moving for summary judgment is to establish its right to relief as a matter of law (see Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 508 N.Y.S.2d 923, 501 N.E.2d 572 ; Winegrad v. New York Univ. Med. Cir., 64 N.Y.2d 851, 487 N.Y.S.2d 316, 476 N.E.2d 642  ). “All of the evidence must be viewed in the light most favorable to the plaintiff, as the opponent of the motion for summary judgment, and all reasonable inferences must be resolved in [its] favor” (Giraldo v. Twins Ambulette Serv., Inc., 96 A.D.3d 903, 903, 946 N.Y.S.2d 871 [2d Dept. 2012] ).
In this quiet title action under RPAPL Article 15, plaintiff's current ownership of the unit is not disputed, nor does defendant challenge plaintiff's entitlement to assert the statute of limitations. The question to be addressed is whether defendant is time-barred as a matter of law from making any further claim to foreclose on its 2007 mortgage.
The statute of limitations applicable to a foreclosure action is six years from the date of acceleration of the debt (CPLR 213; see Kashipour v. Wilmington Sav. Fund Socy., FSB, 144 A.D.3d 985, 986, 41 N.Y.S.3d 738 [2d Dept. 2016] ). At issue here is whether, or when, the debt was effectively accelerated by the May 2, 2008 filing of the complaint in the 2008 foreclosure action.
It is the position of defendant lender that the complaint in the 2008 foreclosure action cannot have served to effectively accelerate the debt and trigger the running of the statute of limitations, since as a matter of law that action was a nullity because the defendant borrower was deceased at the time the action was commenced (see U.S. Bank N.A. v. Cadeumag, 147 A.D.3d 881, 881, 47 N.Y.S.3d 358 [2d Dept. 2017] ). In contrast, while plaintiff concedes that the 2008 foreclosure action was a nullity because the named defendant was deceased at the time the action was commenced (see id.), it maintains that nevertheless, the acceleration of the debt that resulted from the filing of that complaint was not nullified. It emphasizes the definitive acceleration language in the complaint, namely, “Plaintiff has elected and hereby elects to declare immediately due and payable the entire unpaid balance of principal.” It further observes that the pre-litigation default notice dated March 4, 2008 confirms that the lender affirmatively decided to accelerate the mortgage debt, since it states that “Your failure to cure the default within 30 days from the date of this notice will result in the entire mortgage balance becoming due and payable under the terms of the Note and Mortgage.”
There are several ways a mortgage debt may be accelerated (see Milone v. U.S. Bank Natl. Assn., 164 A.D.3d 145, 152, 83 N.Y.S.3d 524 [2d Dept. 2018] ).
“One way is in the form of an acceleration notice transmitted to the borrower by the creditor or the creditor's servicer. To be effective, the acceleration notice to the borrower must be clear and unequivocal. A second form of acceleration, which is self-executing, is the obligation of certain borrowers to make a balloon payment under the terms of the note at the end of the pay-back period. A third form of acceleration exists when a creditor commences an action to foreclose upon a note and mortgage and seeks, in the complaint, payment of the full balance due”
(Milone v. U.S. Bank, 164 A.D.3d at 152, 83 N.Y.S.3d 524 [2d Dept. 2018] [citations omitted] ).
The foregoing paragraph from Milone reflects that for the mortgage debt to be effectively accelerated by an acceleration notice, the notice must have been “transmitted to the borrower” (id.). Therefore, arguably, if no “borrower” was alive to receive a mailed acceleration notice, then the mailed notice would not have been transmitted to the borrower and the debt could not effectively be accelerated. In contrast, however, while a debt may not be accelerated if the notice is not given to the borrower, the third method of acceleration discussed by Milone, the commencement of a foreclosure action, does not require that the borrower have been successfully notified. Rather, the acceleration is accomplished upon the filing of the complaint, irrespective of whether the complaint was actually transmitted to the borrower (see Beneficial Homeowner Serv. Corp. v. Tovar, 150 A.D.3d 657, 55 N.Y.S.3d 59 [2d Dept. 2017], cited with approval in MSMJ Realty, LLC v. DLJ Mtge. Capital, Inc., 157 A.D.3d 885, 69 N.Y.S.3d 870 [2d Dept. 2018] ).
In Beneficial v. Tovar, the mortgage debt at issue was found to have been accelerated by the filing of a summons and complaint in a 2007 foreclosure action even though the borrower was not personally served with the summons and complaint, leading to the dismissal of that action. As a result, that lender's subsequent 2014 foreclosure action was found to be time-barred. The Court there explained that whether the borrower actually received the summons and complaint was irrelevant to the acceleration of the debt through the filing of the complaint:
“The filing of the summons and complaint and notice of pendency in the 2007 action constituted a valid election to accelerate the maturity of the debt․ [T]he fact that the 2007 action was dismissed as against the defendant homeowner for failure to effectuate personal service does not invalidate the plaintiff's election to exercise its right to accelerate the maturity of debt. ‘The fact of election should not be confused with the notice or manifestation of such election.’ Nothing in the parties' agreement provides that the plaintiff's election is not valid until the defendant homeowner receives notice thereof. Consequently, the failure to properly serve the summons and complaint upon the defendant homeowner did not as a matter of law destroy the effect of the sworn statement that the plaintiff had elected to accelerate the maturity of the debt”
(Beneficial v. Tovar, 150 A.D.3d at 658, 55 N.Y.S.3d 59, quoting Albertina Realty Co. v. Rosbro Realty Corp., 258 N.Y. 472, 476, 180 N.E. 176  [other citations omitted] ).
The ruling of Beneficial v. Tovar is applicable here. Just as that lender's 2007 filing of a summons and complaint in itself accelerated the debt, without reference to whether the borrower received notice of it, here the lender's filing of the 2008 summons and complaint in itself accelerated the debt, although the borrower was not alive at the time so that the action could not be sustained.
Since the 2008 acceleration was effective, defendant's 2016 revocation of its previous acceleration of the mortgage debt is of no use to defendant. When it discontinued the 2011 foreclosure action in 2016, counsel's affirmation canceling the 2011 notice of pendency included the recitation, “the acceleration of the loan is hereby rescinded.” This language may have been sufficient to validly revoke its 2011 acceleration of the debt, but it was too late to revoke the 2008 acceleration of the debt. “A lender may revoke its election to accelerate the mortgage, but it must do so by an affirmative act of revocation occurring during the six-year statute of limitations period subsequent to the initiation of the prior foreclosure action” (Soroush v. Citimortgage, Inc., 161 A.D.3d 1124, 1126, 77 N.Y.S.3d 691 [2d Dept. 2018] [citations omitted]; MSMJ Realty, LLC v. DLJ Mtge. Capital, Inc., 157 A.D.3d at 887, 69 N.Y.S.3d 870; U.S. Bank N.A. v. Barnett, 151 A.D.3d 791, 793, 56 N.Y.S.3d 255 [2d Dept. 2017]; NMNT Realty Corp. v. Knoxville 2012 Trust, 151 A.D.3d 1068, 1069-1070, 58 N.Y.S.3d 118 [2d Dept. 2017] ).
To avoid a determination that the debt was accelerated based on the commencement of the 2008 foreclosure action, defendant relies on the reasoning exemplified in Nationstar Mortgage, LLC v. MacPherson, 56 Misc. 3d 339, 350, 54 N.Y.S.3d 825 (Sup. Ct. Suffolk County 2017), which in effect created an exception to the rule that commencement of a foreclosure action accelerates the entire debt. Nationstar v. MacPherson held that where the terms of the mortgage give the mortgagor the right to reinstate the loan by paying only the arrears due—as is true here—a mortgage debt is not accelerated by the commencement of a foreclosure action, but solely by the judgment of foreclosure (id.; see generally Adam M. Swanson, Understanding Mortgage Acceleration and Its Statute of Limitations Implications, N.Y.L.J., Jan. 3, 2019 at 4, col. 4).
However, a number of trial-level courts have considered and rejected the holding in Nationstar Mortgage v. MacPherson (see e.g. U.S. Bank N.A. v. Janes, 2018 N.Y. Slip Op. 33393[U], 2018 WL 6790248, 2018 N.Y. Misc. LEXIS 6688 [Sup. Ct. N.Y. County 2018]; Persaud v. U.S. Bank Natl., 62 Misc.3d 193, 86 N.Y.S.3d 861 [Sup. Ct. Queens County 2018]; but see Wells Fargo Bank, N.A. v. Fetonti, 2018 N.Y. Slip Op. 30193[U], 2018 WL 823782, 2018 N.Y. Misc. LEXIS 391 [Hon. Lawrence Ecker, J.] ). As these cases emphasize, the Second Department has repeatedly and unwaveringly held, including within the past month, that acceleration of a mortgage occurs by the commencement of a foreclosure action with the filing of a summons and complaint (see e.g. 21st Mortgage Corp. v. Osorio, 167 A.D.3d 823, 90 N.Y.S.3d 274 [2nd Dept. 2018]; U.S. Bank Trust, N.A. v. Aorta, 167 A.D.3d 807, 89 N.Y.S.3d 717 [2nd Dept. 2018] ). Indeed, in the almost two years since Nationstar v. MacPherson was issued on April 3, 2017, the Second Department has not echoed or approved that holding. The only type of situation in which the Second Department has held that filing a foreclosure complaint does not accelerate the mortgage debt is where the lender did not at that time have the authority to accelerate the debt or sue to foreclose, such as where it was not yet the holder of the note (see e.g. U.S. Bank N.A. v. Gordon, 158 A.D.3d 832, 836, 72 N.Y.S.3d 156 [2d Dept. 2018]; Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d 980, 943 N.Y.S.2d 540 [2d Dept. 2012] ).
Therefore, the filing of the complaint in the 2008 foreclosure action accelerated the debt, which acceleration was not timely revoked, and the six year limitations period has expired.
It is worth noting that defendant lender had ample opportunity to attempt to foreclose on the unit before the statute of limitations ran, but failed to do so, and that plaintiff, the current owner of the unit, does not owe defendant any debt.
Plaintiff having established as a matter of law its right to summary judgment, and defendant having failed to establish the existence of a material issue of fact, it is hereby
ORDERED that plaintiff's motion is granted.
Settle judgment providing for a declaration canceling and discharging of record the challenged mortgage, and adjudging plaintiff's interest in the subject property to be free therefrom.
Terry Jane Ruderman, J.
Response sent, thank you
Docket No: 59896/2018
Decided: January 18, 2019
Court: Supreme Court, Westchester County, New York.
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