BANK OF AMERICA v. GULNICK (2019)

MEMORANDUM AND ORDER

In September 2008, John C. Casciaro (hereinafter decedent) executed a home equity conversion mortgage (hereinafter the mortgage), more commonly referred to as a reverse mortgage, to secure a note for $361,500.  Identical terms in the note and mortgage authorized the lender to require immediate payment in full upon the death of the borrower.  Decedent died on December 20, 2009.  As relevant here, on March 12, 2012, limited letters of administration were issued to defendant Burton Gulnick Jr. (hereinafter defendant), as public administrator of decedent's estate.  Plaintiff commenced this action to foreclose the mortgage on August 11, 2016 and, in January 2017, after all named defendants defaulted, moved for an order of reference.  Defendant cross-moved, as relevant here, for leave to serve a late answer, asserting that there was a meritorious statute of limitations defense.  Supreme Court determined that the statute of limitations defense lacked merit and, accordingly, denied defendant's cross motion and granted plaintiff's motion.  Defendant moved to reargue.  Supreme Court granted the motion and, upon reargument, dismissed the complaint as untimely.  Plaintiff appeals.

As the party asserting the statute of limitations defense, defendant “bore the initial burden of establishing prima facie that the time to sue had expired, and thus [was] required to establish, among other things, when ․ plaintiff's cause of action accrued” (Haynes v. Williams, 162 A.D.3d 1377, 1378, 79 N.Y.S.3d 365 [2018] [internal quotation marks, ellipsis, brackets and citations omitted], lv denied 32 N.Y.3d 906, 2018 WL 4997517 [2018];  see Matter of Baird, 58 A.D.3d 958, 959, 871 N.Y.S.2d 755 [2009] ).  We recently noted that “[r]everse mortgages are designed to allow elderly homeowners to borrow money against the accumulated equity in their homes and, unlike traditional mortgages, the borrower in a reverse mortgage receives periodic payments (or a lump sum) and need not repay the outstanding loan balance until certain triggering events occur[,] generally ․ the death of the borrower or the sale of the home” (Onewest Bank, FSB v. Smith, 135 A.D.3d 1063, 1063–1064, 22 N.Y.S.3d 674 [2016] [internal quotation marks and citation omitted] ).  Identical terms in the note and mortgage provided that the “[l]ender may require immediate payment in full ․ if:  [a][b]orrower dies and the [p]roperty is not the principal residence of at least one surviving [b]orrower” (emphasis added).

Defendant contends that the cause of action arose upon decedent's death, when plaintiff had the right to demand payment in full (see Wendover Fin. Servs. v. Ridgeway, 137 A.D.3d 1718, 1719, 28 N.Y.S.3d 535 [2016], lv denied 140 A.D.3d 1715, 32 N.Y.S.3d 525 [2016] ).  Plaintiff notes that because “may” is ordinarily read as permissive language (see Onewest Bank, FSB v. Smith, 135 A.D.3d at 1065, 22 N.Y.S.3d 674), it had no obligation to demand payment in full and argues, therefore, that no cause of action accrues until payment is demanded.  Plaintiff's argument is unavailing.  “[W]here the claim is for payment of a sum of money allegedly owed pursuant to a contract, the cause of action accrues when the party making the claim possesses a legal right to demand payment.  In other words, the statute of limitations [is] triggered when the party that was owed money had the right to demand payment, not when it actually made the demand” (Hahn Automotive Warehouse, Inc. v. American Zurich Ins. Co., 18 N.Y.3d 765, 770–771, 944 N.Y.S.2d 742, 967 N.E.2d 1187 [2012] [internal quotation marks, brackets and citations omitted];  see CPLR 206[a];  Gower v. Weinberg, 184 A.D.2d 844, 845, 584 N.Y.S.2d 496 [1992] ).  This rule applies even though the party that is owed money does not have knowledge of the event giving rise to a cause of action (see Wendover Fin. Servs. v. Ridgeway, 137 A.D.3d at 1719, 28 N.Y.S.3d 535;  Gower v. Weinberg, 184 A.D.2d at 845, 584 N.Y.S.2d 496).  A contrary rule providing that a cause of action accrues only when a demand is made would permit a plaintiff “to extend the statute of limitations indefinitely by simply failing to make a demand” (Hahn Automotive Warehouse, Inc. v. American Zurich Ins. Co., 18 N.Y.3d at 771, 944 N.Y.S.2d 742, 967 N.E.2d 1187 [internal quotation marks and citation omitted];  see State of New York v. City of Binghamton, 72 A.D.2d 870, 871, 421 N.Y.S.2d 950 [1979] ).  Thus, we conclude that defendant has established prima facie that plaintiff's cause of action was untimely because it was commenced more than six years after decedent's death (see CPLR 213[4] ).

Plaintiff further contends that it is, nonetheless, immune from the statute of limitations imposed by state law because it was acting as an assignee or agent of a federal agency (see Fleet Natl. Bank v. D'Orsi, 26 A.D.3d 898, 899, 811 N.Y.S.2d 502 [2006] ).  When a defendant meets the initial burden of proving that the time within which to commence a cause of action has expired, “[t]he burden then shifts to the nonmoving party to raise a question of fact as to the applicability of an exception to the statute of limitations” (Plaza Invs. v. Capital One Fin. Corp., 165 A.D.3d 853, 854, 86 N.Y.S.3d 511 [2018];  see Texeria v. BAB Nuclear Radiology, P.C., 43 A.D.3d 403, 404, 840 N.Y.S.2d 417 [2007];  Easton v. Sankel, 268 A.D.2d 861, 863, 703 N.Y.S.2d 542 [2000], affd 95 N.Y.2d 290, 716 N.Y.S.2d 367, 739 N.E.2d 733 [2000] ).  Plaintiff alleged that the mortgage loan is insured by the Department of Housing and Urban Development (hereinafter HUD) (see e.g. Plunkett v. Castro, 67 F.Supp.3d 1, 6–7 [D.D.C. 2014] [explaining the operation of reverse mortgages and noting that they are insured by HUD] ).  HUD is not a party to this action, and the record does not contain any information explaining the alleged insurance program or the extent of any liability that HUD may incur as a result.  Nor does the record show that HUD ever held the mortgage or had a right to foreclose it, regardless of whether it paid on an insurance claim;  in fact, HUD holds a second mortgage on the property for the full loan amount.  Thus, we conclude that the record fails to establish that plaintiff is entitled to an exception from the statute of limitations imposed by New York law (see LPP Mtge. Ltd. v. Gold, 44 A.D.3d 718, 719, 842 N.Y.S.2d 739 [2007];  Fleet Natl. Bank v. D'Orsi, 26 A.D.3d at 900, 811 N.Y.S.2d 502;  cf. RCR Servs. v. Herbil Holding Co., 229 A.D.2d 379, 380, 645 N.Y.S.2d 76 [1996] ).  Plaintiff's remaining arguments have been examined and found to lack merit.

ORDERED that the order is affirmed, with costs.

Rumsey, J.

Egan Jr., J.P., Lynch, Aarons and Pritzker, JJ., concur.