MORTGAGE FORECLOSURE: STATUTE OF LIMITATIONS DEFENSE NOT AVAILABLE

Wells Fargo Bank v. Rodriguez, NYLJ 2/21/19, Date filed: 2019-01-25, Court: Supreme Court, Queens, Judge: Justice Denis Butler, Case Number: 716731/2017:

"The initial date of default upon the loan was February 1, 2010. Borrower argues that the note was accelerated on September 8, 2010, by operation of the acceleration letter mailed to him on August 6, 2010, and his failure to cure. A prior foreclosure action was commenced but discontinued, on consent, on May 25, 2016. Borrower now moves the dismiss the complaint as time-barred (see CPLR 213 [3]; 3211 [a] [5]), arguing that the lender made no overt act of revocation and that the voluntary discontinuance did not decelerate the note because the acceleration was not accomplished by commencement of the prior action.

An action to foreclose a mortgage is subject to a six-year statute of limitations (see CPLR 213 [4]). That limitations period begins to run on the entire debt when the mortgagee elects to accelerate the mortgage (see U.S. Bank, N.A. v. Martin, 144 AD3d 891, 891-892 [2d Dept 2016]; EMC Mtge. Corp. v. Smith, 18 AD3d 602 [2d Dept 2005]; Loiacono v. Goldberg, 240 AD2d 476, 477 [2d Dept 1997]). “Acceleration occurs, inter alia, by the commencement of a foreclosure action” (Deutsche Bank Natl. Trust Co. v. Adrian, 157 AD3d 934, 935 [2d Dept 2018]; see Fannie Mae v. 133 Mgt., LLC, 126 AD3d 670, 670 [2d Dept 2015]; Clayton Natl. v. Guldi, 307 AD2d 982, 982 [2d Dept 2003]). “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” (NMNT Realty Corp. v. Knoxville 2012 Trust, 151 AD3d 1068,1069-1070 [2d Dept 2017]). The Court of Appeals has held that when there is a validly filed stipulation of discontinuance resolving a case, it is as if the case “had never been begun” (Yonkers Fur Dressing Co. Inc. v. Royal Ins. Co. Ltd., 247 NY 435, 444, 160 N.E. 778 [1928]). In Housberg v. Baker (146 Misc 2d 960, 962 [Sup Ct, Suffolk County 1990], quoting treatise on New York law, the court stated as follows:

“When an action is discontinued, it is as if the action had never been; all prior orders in the case are nullified. Once an action has been discontinued, there can be no judgment or appeal, and no objection to another action for the same relief on the ground that a prior action is pending…once an action has been discontinued by consent or stipulation, it is [as though] the action never existed….”
The Second Department has adhered to that rule. In Newman v. Newman (245 AD2d 353, 354 [2d Dept 1997]), the court held that “[w]hen an action is discontinued, it is as if it had never been; everything done in the action is annulled and all prior orders in the case are nullified.” Furthermore, in U.S. Bank N.A. v. Wongsonadi (55 Misc 3d 1207[A], 2017 NY Slip Op 50452[U] [Sup Ct, Queens County 2017]), the court noted that “the election to accelerate contained in the complaint was nullified when plaintiff voluntarily discontinued the prior action” and the discontinuance of the prior foreclosure action was therefore “an affirmative act of revocation.”

This court declines to extend the ruling in cases such as EMC Mortg. Corp. v. Patella (279 AD2d 604 [2d Dept 2001]) and Federal National Mortgage Association v. Mebane (208 [*2]AD2d 892 [2d Dept 1994]). In Patella, the initial foreclosure action was dismissed by the court because the lender failed to appear at a certification conference. Similarly, in Mebane, ” [t]he prior foreclosure action was never withdrawn by the lender, but rather, dismissed sua sponte by the court” (208 AD2d at 894). The rule to extrapolate is that, unlike a voluntary discontinuance, a dismissal by the court does not constitute an affirmative act by the lender to revoke its election to accelerate (see e.g. MSMJ Realty, LLC v. DLJ Mortg. Capital, Inc., 157 AD3d 885 [2d Dept 2018] [finding that the statute of limitations had run where the first foreclosure action was dismissed sua sponte for lack of personal jurisdiction]; Kashipour v. Wilmington Sav. Fund Socy., FSB, 144 AD3d 985, 986 [2d Dept 2016] [holding that the statute of limitations had run where the first foreclosure action was dismissed without prejudice for failure to comply with the notice requirements of RPAPL 1303]).

Here, even if the debt was accelerated on September 8, 2010, which the court does not find, the prior action was voluntarily discontinued within six years of that date (cf. Deutsche Bank Natl. Trust Co. v. Adrian, 157 AD3d 934, 935-936), and the election to accelerate the debt was thereby revoked by affirmative act. It is immaterial whether an acceleration is effected by letter or commencement of a foreclosure action. A voluntary discontinuance is an affirmative act that functions to decelerate the debt.

Moreover, pursuant to section 19 of the mortgage, plaintiff bargained away its right to demand payment in full simply upon a default in an installment payment or the commencement of an action and has afforded borrower greater protections than that set forth in the statutory form of an acceleration clause under Real Property Law §258 or under the holding in Albertina Realty Co. v. Rosbro Realty Corp. (258 NY 472 [1932]). “A familiar and eminently sensible proposition of law, is that, when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms” (W.W.W. Assocs. v. Giancontieri, 77 NY2d 157 [1990]). “As with any other contractual option, the holder of an option may be required to exercise an option to accelerate the maturity of a loan in accordance with the terms of the mortgage” (Nationstar Mortg., LLC v. MacPherson, 56 Misc 3d 339, 350 [Sup Ct, Suffolk County 2017]).

Under the express wording the mortgage document, section 19, plaintiff has no right to reject borrower’s payment of arrears in order to reinstate the mortgage, until a judgment is entered. Under the contract terms at issue, plaintiff does not have a legal right to require payment in full by filing a foreclosure action or sending an acceleration letter. Borrower could pay the unpaid installments and the payment of same would destroy the option to accelerate. Until the option to declare the entire debt due is effectively exercised, borrower has the right to tender the payments then due and make good on his or her defaults. Here, it is a judgment that triggers the acceleration in full of the entire mortgage debt.

Contrary to borrower’s contentions, the instant foreclosure action is not time-barred (see CPLR 213 [4]). Accordingly, borrower’s motion to dismiss the complaint is denied."