MORTGAGE FORECLOSURE - BANK WITHOUT STANDING CANNOT ACCELERATE THE DEBT

Herzl Dev. Group, LLC v Federal Natl. Mtge. Assn., 2019 NY Slip Op 06385, Decided on August 28, 2019, Appellate Division, Second Department:

"In June 2005, nonparty Paul Russell executed a note in favor of Countrywide Home Loans, Inc. (hereinafter Countrywide), secured by a mortgage given to Mortgage Electronic Registration Systems, Inc., as nominee for Countrywide, encumbering real property in Brooklyn. Upon Russell's default, Countywide mailed a notice of default dated May 17, 2007. In or about July 2007, Countrywide commenced an action to foreclose the mortgage (hereinafter the 2007 foreclosure action), which was subsequently dismissed for lack of standing. A second action to foreclose the mortgage was dismissed for lack of personal jurisdiction.

Thereafter, in 2014, the plaintiff obtained title to the property and commenced this action pursuant to RPAPL 1501(4), seeking to cancel and discharge the mortgage on the ground that the statute of limitations for commencing an action to foreclose the mortgage had expired. The defendant moved pursuant to CPLR 3211(a)(1) to dismiss the complaint, arguing that documentary evidence demonstrated that the debt was never accelerated, and therefore that the statute of limitations had not expired. By order dated June 9, 2016, the Supreme Court granted the defendant's motion. The plaintiff appeals.

"With respect to a mortgage payable in installments, separate causes of action accrue for each installment that is not paid, and the statute of limitations begins to run, on the date each installment becomes due" (Wells Fargo Bank, N.A. v Burke, 94 AD3d 980, 982; see U.S. Bank N.A. v Gordon, 158 AD3d 832, 835). However, once such a mortgage debt is accelerated, the entire amount is due and the statute of limitations begins to run on the entire debt (see Nationstar Mtge., LLC v Weisblum, 143 AD3d 866, 867; Wells Fargo Bank, N.A. v Burke, 94 AD3d at 982). "Where the acceleration of the maturity of a mortgage debt on default is made optional with the holder of the note and mortgage, some affirmative action must be taken evidencing the holder's election to take [*2]advantage of the accelerating provision, and until such action has been taken the provision has no operation" (Wells Fargo Bank, N.A. v Burke, 94 AD3d at 982-983). "Where the holder of the note elects to accelerate the mortgage debt, notice to the borrower must be clear and unequivocal'" (Nationstar Mtge., LLC v Weisblum, 143 AD3d at 867, quoting Sarva v Chakravorty, 34 AD3d 438, 439).

Here, the documentary evidence submitted by the defendant conclusively demonstrated that the debt was not accelerated either by the May 17, 2007, notice of default or by the complaint in the 2007 foreclosure action, as the plaintiff herein alleged. Although the complaint in the 2007 action expressly "elect[ed] to declare immediately due and payable the entire unpaid balance of the principal" (see Milone v US Bank N.A., 164 AD3d 145, 152), Countrywide was found to lack standing in that action, and thus, did not have the authority to accelerate the debt at that time (see J & JT Holding Corp. v Deutsche Bank Natl. Trust Co., 173 AD3d 704; U.S. Bank N.A. v Gordon, 158 AD3d 836; 21st Mtge. Corp. v Adames, 153 AD3d at 475). Further, the May 17, 2007, notice of default, which provided that the debt would be accelerated if the borrower failed to cure the default by a date certain, was "nothing more than a letter discussing acceleration as a possible future event, which does not constitute an exercise of the mortgage's optional acceleration clause" (21st Mtge. Corp. v Adames, 153 AD3d at 475; see FBP 250, LLC v Wells Fargo Bank, N.A., 164 AD3d 1307, 1309; Milone v US Bank N.A., 164 AD3d at 152)."