Opinion
Index No. E012018012979
05-03-2024
Federal National Mortgage Association ("FANNIE MAE"), A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, Plaintiff, v. Lawrence C. Marshall, Defendant.
Amber Jurek, Esq. Gross Polowy LLC Attorneys for Plaintiff Marlene Morales Melo, Esq. The Legal Aid Society of Northeastern New York, Inc. Attorneys for Defendant
Amber Jurek, Esq.
Gross Polowy LLC
Attorneys for Plaintiff
Marlene Morales Melo, Esq.
The Legal Aid Society of
Northeastern New York, Inc.
Attorneys for Defendant
Daniel C. Lynch, J.
DANIEL C. LYNCH, J.S.C.
This litigation arises out of defendant's default on a promissory note secured by a mortgage on residential real property at 738 Warren Street, Hudson, New York (hereinafter the property). On April 9, 2009, plaintiff's predecessor in interest, GreenPoint Mortgage Funding, Inc. (hereinafter "GreenPoint"), commenced a foreclosure action against defendant based on the subject mortgage (hereinafter "the 2009 action") (NYSCEF Doc. No. 40). On March 29, 2013, GreenPoint voluntarily discontinued the 2009 action (NYSCEF Doc. No. 41). On May 29, 2018, plaintiff commenced the instant action (hereinafter "the instant action"). Defendant answered, asserting multiple affirmative defenses, including that the statute of limitations on mortgage foreclosure actions had expired. Defendant also asserted counterclaims pursuant to RPAPL 1501 (4) and Real Property Law (hereinafter "RPL") § 282. In September 2022, this Court (Koweek, J.) granted plaintiff's motion for summary judgment and an order of reference, holding, as relevant here, that plaintiff's voluntary discontinuance of the 2009 action in 2013 revoked the acceleration of the mortgage, and so the statute of limitations had not expired when the instant action was commenced.
In January 2024, plaintiff moved to confirm the referee report and for a judgment of foreclosure and sale (NYSCEF Doc. No. 88). Defendant cross-moved (1) for leave to renew his opposition to plaintiff's motion for summary judgment, and his accompanying counterclaims, pursuant to CPLR 2221 (e), in light of the enactment of the Foreclosure Abuse Prevention Act (hereinafter "FAPA"); (2) to vacate the September 28, 2022 Decision and Order pursuant to CPLR 2221 and/or CPLR 5015; (3) for the dismissal of the complaint as time-barred under CPLR 213 (4) (e) and 3211 (a) (5); (4) for the cancellation and discharge of the subject mortgage pursuant to RPAPL 1501 (4); (5) for reasonable attorneys' fees and costs pursuant to RPL § 282; for the denial of plaintiff's motion to confirm the Referee Report and for a Judgment of Foreclosure and Sale; (7) to cancel the notices of pendency filed with the Columbia County Clerk's Office; and (8) for any further relief as the Court deems just and proper. Plaintiff opposes, arguing that defendant's cross-motion is barred by res judicata and law of the case, that FAPA does not apply retroactively, and that if it was retroactively applied, it would violate the United States and New York Constitutions under due process, the Contracts Clause and the Takings Clause.
I. Motion to Renew Standard
"A motion for leave to renew: (1) shall be identified specifically as such; (2) shall... demonstrate that there has been a change in the law that would change the prior determination; and (3) shall contain reasonable justification for the failure to present such facts on the prior motion" (CPLR 2221 [e]). Defendant's cross-motion is clearly identified as a motion to renew, and explains that FAPA was enacted in December 2022, three months after the decision on plaintiff's summary judgment motion. Defendant argues that FAPA would have altered the prior determination, as it changed the law regarding the acceleration and de-acceleration of foreclosures, and the effect of a de-acceleration on the running of the statute of limitations in mortgage foreclosure cases.
A mortgage foreclosure action must be commenced within six years of the time the statute of limitations begins to run, which occurs at the time the loan is accelerated (see CPLR 213 [4]; Lubonty v U.S. Bank N.A., 34 N.Y.3d 250, 261 [2019]; Ronen, LLC v Bais Hamedrash Ateres Chaim Hanipoly, 221 A.D.3d 741, 744 [2d Dept 2023]). At the time of the September 2022 decision, the de-acceleration of the loan - such as through the voluntary discontinuance of a foreclosure action - stopped the running of the statute of limitations (see Freedom Mtge. Corp. v Engel, 37 N.Y.3d 1, 31-32 [2021]; U.S. Bank N.A. v Creative Encounters LLC, 194 A.D.3d 1135, 1137 [3d Dept 2021]). As the September 2022 decision explained, the 2009 action was voluntarily discontinued by plaintiff's predecessor in interest in 2013, just under four years into the statute of limitations, meaning that under the law as it existed in September 2022, the instant action was timely commenced (see id.).
However, in December 2022, FAPA was enacted. In relevant part, this legislation amended CPLR 203 by adding subdivision (h), which states that "[o]nce a cause of action upon an instrument described in [CPLR 213 (4)] has accrued, no party may, in form or effect, unilaterally waive, postpone, cancel, toll, revive, or reset the accrual thereof, or otherwise purport to effect a unilateral extension of the limitations period prescribed by law to commence an action and to interpose the claim, unless expressly prescribed by statute." Similarly, FAPA amended CPLR 3217 by adding subdivision (e), which states that "[i]n any action on an instrument described under [CPLR 213 (4)], the voluntary discontinuance of such action... shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute." Clearly, the application of FAPA would change the Court's September 2022 determination, as it would render the instant action time-barred, because it would mean that the statute of limitations expired six years after the 2009 acceleration of the loan - in 2015. Defendant was justified in failing to raise it in opposition to plaintiff's summary judgment motion in September 2022, as the law had not yet been enacted. As such, defendant's cross-motion to renew should be granted and the September 2022 decision is hereby vacated (see CPLR 2221 [e]; Bayview Loan Servicing, LLC v Dalal, 80 Misc.3d 1100, 1103 [Sup Ct, Bronx County 2023]).
II. The Preclusive Effect of the September 2022 Decision
Before the merits of defendant's FAPA arguments are addressed, plaintiff contends that defendant's cross-motion for leave to renew is barred by res judicata and the law of the case doctrine, as the September 2022 decision already held that the instant action was timely commenced. As to plaintiff's res judicata argument, this doctrine only applies when there is a final judgment on the merits (see Jeda Capital-56, LLC v Potsdam Assoc., LLC, 225 A.D.3d 988, 989-990 [3d Dept 2024]; Emmons v Broome County, 180 A.D.3d 1213, 1216 [3d Dept 2020]). "A judgment of foreclosure and sale is final as to all questions at issue between the parties, and concludes all matters of defense which were or could have been litigated in [a] foreclosure action" (Eaddy v U.S. Bank N.A., 180 A.D.3d 756, 758 [2d Dept 2020] [internal quotation marks and citations omitted]; accord Tracey v Deutsche Bank Natl. Trust Co., 187 A.D.3d 815, 817 [2d Dept 2020]). Here, a judgment of foreclosure and sale has not been entered - in fact, a motion for a judgment of foreclosure and sale is currently pending before this Court (NYSCEF Doc. No. 88). As such, contrary to plaintiff's contention, the September 2022 grant of summary judgment is not a final judgment regarding the parties' interests in the property sufficient to have preclusive effect, and so defendant's cross-motion to renew is not collaterally estopped by that decision (see Nutt v Cuming, 155 NY 309, 313 [1898]; Ray v JP Morgan Chase Bank, N.A., 145 A.D.3d 812, 813-814 [2d Dept 2016]; Siegel & Connors, NY Prac § 448 [6th ed 2023]; compare Tracey v Deutsche Bank Natl. Trust Co., 187 A.D.3d at 817).
As to plaintiff's law of the case argument, "[t]he doctrine of law of the case is a judicially crafted policy that expresses the practice of courts generally to refuse to reopen what has been decided," and applies "when a second court of the same hierarchical jurisdiction becomes involved in the same matter" (Gulf Coast Bank & Trust Co. v Virgil Resort Funding Group, Inc., 201 A.D.3d 1086, 1088 [3d Dept 2022] [internal quotation marks and citations omitted], lv denied 38 N.Y.3d 909 [2022]; see Curley v Curley, 195 A.D.3d 1183, 1186 [3d Dept 2021]). This doctrine "operates to foreclose re-examination of [a certain legal] question absent a showing of subsequent evidence or change of law" (J-Mar Serv. Ctr., Inc. v Mahoney, Connor & Hussey, 45 A.D.3d 809, 809 [2d Dept 2007] [internal quotation marks, brackets and citations omitted]; accord Strujan v Glencord Bldg. Corp., 137 A.D.3d 1252, 1253 [2d Dept 2016]). As defendant has demonstrated a change in law since the September 2022 decision - the enactment of FAPA - the law of the case doctrine does not bar consideration of defendant's cross-motion to renew (see Strujan v Glencord Bldg. Corp., 137 A.D.3d at 1253; compare Globe Trade Capital, LLC v Hoey, 199 A.D.3d 772, 774 [2d Dept 2021], lv dismissed 38 N.Y.3d 1164 [2022]).
III. The Retroactive Application of FAPA
Returning to the merits of defendant's cross-motion to renew, defendant argues that FAPA applies to this action and retroactively renders it time-barred. Plaintiff responds that the relevant provisions of FAPA - CPLR 203 (h) and 3217 (e) - do not apply retroactively, as new legislation is presumptively prospective and there is no indication that FAPA was intended to apply retroactively, meaning that the instant action was not commenced outside the statute of limitations.
"Amendments are presumed to have prospective application unless the Legislature's preference for retroactivity is explicitly stated or clearly indicated," but "remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose" (Matter of Gleason [Michael Vee, Ltd.], 96 N.Y.2d 117, 122 [2001]). "[T]he retroactivity analysis include[s] whether the Legislature has made a specific pronouncement about retroactive effect or conveyed a sense of urgency; whether the statute was designed to rewrite an unintended judicial interpretation; and whether the enactment itself reaffirms a legislative judgment about what the law in question should be" (id.; see People v Duggins, 192 A.D.3d 191, 193 [3d Dept 2021], lv denied 36 N.Y.3d 1096 [2021]).
The text of FAPA states that the act was to "take effect immediately [in December 2022] and... apply to all actions commenced on an instrument described under [CPLR 213 (4)] in which a final judgment of foreclosure and sale has not been enforced" (L 2022, ch 821 § 10). The Senate Introducer's memorandum in support of the act stated that it was intended to resolve "an ongoing problem with abuses of the judicial foreclosure process and lenders' attempts to manipulate statutes of limitations," which was "exacerbated by recent court decisions which, contrary to the intent of the legislature, have given [foreclosure plaintiffs] opportunities to avoid strict compliance with remedial statutes and manipulate statutes of limitation to their advantage" (Senate Introducer's Mem in Support, Bill Jacket, L 2022, ch 821; see Assembly Mem in Support, Bill Jacket, L 2022, ch 821). As such, FAPA was passed "to clarify the meaning of existing statutes, and to rectify these erroneous judicial interpretations thereof" (Senate Introducer's Mem in Support, Bill Jacket, L 2022, ch 821; see Assembly Mem in Support, Bill Jacket, L 2022, ch 821).
Furthermore, the legislative history states that CPLR 203 (h) was added specifically to clarify that foreclosure plaintiffs "have no unilateral right or ability to declare themselves 'un-harmed' and then 're-harmed'" in order to "effectuate[ ] an unlawful extension of the time limited by law for interposition of the claim" (Senate Introducer's Mem in Support, Bill Jacket, L 2022, ch 821; see Assembly Mem in Support, Bill Jacket, L 2022, ch 821). The Legislature clarified that de-acceleration "is merely the lender's election to revoke its demand for full payment; it does not 'de-accrue' the claim for statute of limitations purposes," as CPLR 201 does not permit courts to extend statutes of limitation (Senate Introducer's Mem in Support, Bill Jacket, L 2022, ch 821; see Assembly Mem in Support, Bill Jacket, L 2022, ch 821). The legislative history explains that CPLR 3217 (e) was added for similar reasons (Senate Introducer's Mem in Support, Bill Jacket, L 2022, ch 821; see Assembly Mem in Support, Bill Jacket, L 2022, ch 821). During debate on the bill in the Assembly, legislators stated that it was intended to have "a retroactive effect" (NY Assembly Debate on NY Assembly Bill A7737-B, March 23, 2022 at 9), and the Legislature considered letters regarding the negative impact a retroactive application of the law would have (see Letter from NY Bankers Assoc, Bill Jacket, L 2022, ch 821; Letter from NY Mortgage Bankers Assoc, L 2022, ch 821).
Based on this analysis of the Legislature's intent, the Court holds that FAPA was intended to apply retroactively. The text of the statute itself indicates that it was to "take effect immediately," expressly applying it to pending mortgage foreclosure actions, and the legislative history shows that the statute was intended to clarify that lenders do not have the right to stop the running of the statute of limitations in mortgage foreclosure cases by de-accelerating the loan (see U.S. Bank Trust, N.A. v Miele, 80 Misc.3d 839, 847-848 [Sup Ct, Westchester County 2023]; HSBC Bank USA, N.A. v IPA Asset Mgt., LLC, 79 Misc.3d 821, 823 [Sup Ct, Suffolk County 2023]). As the First and Second Departments of the Appellate Division have held, "[u]ltimately, the Legislature's goal, expressed in the language of FAPA and its legislative history, was to see FAPA applied retroactively" (Genovese v Nationstar Mtge., LLC, 223 A.D.3d 37, 45 [1st Dept 2023]; see ARCPE 1, LLC v DeBrosse, 217 A.D.3d 999, 1001-1002 [2d Dept 2023]). This law is controlling on this Court, and so FAPA must be applied retroactively here.
Applying the relevant provisions of FAPA - CPLR 203 (h) and 3217 (e) - retroactively, the instant action is time-barred. Plaintiff's predecessor in interest, GreenPoint, triggered the statute of limitations when it accelerated the loan by commencing the first foreclosure action in April 2009, meaning that the statute of limitations on the action would have, if unaffected, expired in April 2015 (see CPLR 213 [4]). Under these provisions, the 2013 voluntary discontinuance does not stop the running of the statute of limitations, and so the instant action was commenced three years after the expiration of the statute of limitations on the foreclosure claim (see CPLR 203 [h]; 3217 [e]). As such, the instant action is barred by the statute of limitations (see HSBC Bank USA, N.A. v IPA Asset Mgt., LLC, 78 Misc.3d at 824).
IV. The Constitutionality of FAPA's Retroactive Application
Defendant argues that the retroactive application of CPLR 203 (h) and 3217 (e) is constitutional. Plaintiff responds that this would be unconstitutional, contending that the retroactive application of these provisions would (1) violate due process, as there is no legitimate legislative purpose furthered by the retroactive application of FAPA; (2) violate the Contracts Clause of the U.S. Constitution, as plaintiff has a contractually bargained-for right to foreclose on the mortgage, which is removed by FAPA; and (3) violate the Takings Clauses of the U.S. and New York constitutions, as plaintiff relied on existing law when it de-accelerated the mortgage in 2013 and the application of FAPA here would effectively eliminate plaintiff's mortgage lien on the subject property.
"[I]t is well settled that acts of the Legislature are entitled to a strong presumption of constitutionality" (Matter of County of Chemung v Shah, 28 N.Y.3d 244, 262 [2016] [internal quotation marks, brackets and citation omitted]; accord American Economy Ins. Co. v State of New York, 30 N.Y.3d 136, 149 [2017]). The party challenging the constitutionality of a statute "bear[s] the ultimate burden of overcoming that presumption by demonstrating the amendment's constitutional invalidity beyond a reasonable doubt" (American Economy Ins. Co. v State of New York, 30 N.Y.3d at 149; see White v Cuomo, 38 N.Y.3d 209, 216 [2022]). Furthermore, "courts must avoid, if possible, interpreting a presumptively valid statute in a way that will needlessly render it unconstitutional" (LaValle v Hayden, 98 N.Y.2d 155, 161 [2002]; accord Hernandez v State of New York, 173 A.D.3d 105, 121 [3d Dept 2019]).
a. Plaintiff's Due Process Challenge
"In the context of a substantive due process challenge to retroactive legislation," a statute that has been found to have retroactive effect must have "a legitimate legislative purpose furthered by rational means... [which] is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose" (American Economy Ins. Co. v State of New York, 30 N.Y.3d at 157-158 [internal quotation marks and citations omitted]; see Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 35 N.Y.3d 332, 375 [2020]). The Court finds that the retroactive application of FAPA is not a violation of due process, as FAPA is supported by the legitimate legislative purpose of clarifying the effect the de-acceleration of a loan has on the statute of limitations in mortgage foreclosure actions, overruling judicial precedent that the legislature found to inappropriately extend the statute of limitations, which courts do not have the power to do (see CPLR 201). This purpose justifies the retroactive application, as it prevents pending cases from being decided under an incorrect interpretation of the effect de-acceleration has on the statute of limitations (see Bayview Loan Servicing, LLC v Dalal, 80 Misc.3d at 1105; Deutsche Bank Natl. Trust Co. v Dagrin, 79 Misc.3d 393, 399 [Sup Ct, Queens County 2023]). As such, the retroactive application of FAPA does not violate due process (see American Economy Ins. Co. v State of New York, 30 N.Y.3d at 158-159; Matter of Gleason [Michael Vee, Ltd.], 96 N.Y.2d at 122).
b. Plaintiff's Contract Clause Challenge
"No state shall... pass any... [l]aw impairing the [o]bligation of [c]ontracts" (US Const, art I, § 10). "Three questions must be considered to determine whether a state law violates the Contract Clause: (1) is the contractual impairment substantial and, if so, (2) does the law serve a legitimate public purpose such as remedying a general social or economic problem and, if such purpose is demonstrated, (3) are the means chosen to accomplish this purpose reasonable and necessary" (Matter of Buffalo Teachers Fedn., Inc. v Elia, 162 A.D.3d 1169, 1176 [3d Dept 2018] [internal quotation marks and citations omitted], lv denied 32 N.Y.3d 915 [2019]; see Schantz v O'Sullivan, 11 A.D.3d 22, 25 [3d Dept 2004], lv dismissed 3 N.Y.3d 767 [2004]). "A law with 'an extremely narrow focus, not enacted to protect a broad societal interest rather than a narrow class,' will not satisfy the significant and legitimate public purpose test" (Schantz v O'Sullivan, 11 A.D.3d at 26 [quoting Allied Structural Steel Co v Spannaus, 438 U.S. 234, 248-249 [1978]).
The Court holds that the retroactive application of FAPA violates the Contracts Clause. Though plaintiff fails to point to any clauses in the mortgage agreement that allowed it to de-accelerate the loan, and no such right was set forth in either the mortgage or the note (NYSCEF Docs. No. 11 and 12), this does not per se mean that plaintiff's contractual rights are not substantially impaired by the retroactive application of FAPA (compare Bayview Loan Servicing, LLC v Dalal, 80 Misc.3d at 1107; HSBC Bank USA, N.A. v IPA Asset Mgt., LLC, 79 Misc.3d at 825-826). Retroactively applying FAPA clearly impairs plaintiff's contractual rights, altering plaintiff's ability to pursue the bargained-for remedy of foreclosure and taking away this agreed-upon right as it existed at the time the contract was entered into (see W.B. Worthen Co. v Kavanaugh, 295 U.S. 56, 62 [1935]; Schantz v O'Sullivan, 11 A.D.3d at 26-27).
As for the legitimate public purpose of the law, it was intended to protect foreclosure defendants involved in cases where the mortgagee has accelerated and then de-accelerated the loan from the manipulation of the statute of limitations by the mortgagee. This is not protecting a broad societal interest as required by this step of the Contract Clause analysis, but is instead designed to protect a narrow class of individuals who find themselves, through no action of their own other than defaulting on their mortgage, involved in cases that meet the specific factual criteria targeted by the statute. Finally, the retroactive application of FAPA is not a reasonable or necessary way in which to protect these interests. The goal is to avoid abuse of the foreclosure process and the manipulation of the statute of limitations, but the means used - retroactively applying FAPA to render time-barred any actions that were discontinued and recommenced outside the new understanding of the statute of limitations - effectively takes away the bargained-for foreclosure remedy in "an oppressive and unnecessary destruction of nearly all the incidents that give attractiveness and value to collateral security" (W.B. Worthen Co. v Kavanaugh, 295 U.S. at 62; see U.S. Bank N.A. v Speller, 80 Misc.3d 1233 [A], 2023 NY Slip Op 51153[U], *22 [Sup Ct, Putnam County 2023]). Terminating certain mortgagees' contractually bargained-for rights to pursue foreclosure in the service of preventing the manipulation of the statute of limitations is neither reasonable nor necessary. Therefore, the retroactive application of FAPA, set out in § 10 of that statute, violates the Contracts Clause of the United States Constitution (see Allied Structural Steel Co v Spannaus, 438 U.S. at 250; Schantz v O'Sullivan, 11 A.D.3d at 30).
c. Plaintiff's Takings Clause Challenge
"The Takings Clause of the Fifth Amendment of the U.S. Constitution, made applicable to the States through the Fourteenth Amendment, provides that private property shall not be taken for public use, without just compensation. The New York Constitution similarly provides that private property shall not be taken for public use without just compensation" (American Economy Ins. Co. v State of New York, 30 N.Y.3d at 155 [internal quotation marks, ellipsis, brackets and citations omitted]; see Held v State of New York Workers' Compensation Bd., 85 A.D.3d 35, 42-43 [3d Dept 2011]). "The threshold step in any Takings Clause analysis is to determine whether a vested property interest has been identified" (American Economy Ins. Co. v State of New York, 30 N.Y.3d at 155 [citations omitted]). "A right, in turn, is deemed to be vested when it is fixed, settled, absolute and not contingent upon anything" (Matter of Novara v Cantor Fitzgerald, LP, 20 A.D.3d 103, 107-108 [3d Dept 2005] [internal quotation marks and citations omitted], lv denied 5 N.Y.3d 710 [2005]; see Matter of Cobleskill Stone Prods., Inc. v Town of Schoharie, 169 A.D.3d 1182, 1186-1187 [3d Dept 2019]). "A party challenging governmental action as an unconstitutional taking bears a substantial burden[;] evaluating whether an action is a taking requires a court to consider the economic impact of the regulation, its interference with reasonable investment backed expectations, and the character of the governmental action" (James Sq. Assoc. LP v Mullen, 21 N.Y.3d 233, 247 [2013] [internal quotation marks, brackets and citations omitted]; see Medical Socy. of State of NY v Sobol, 192 A.D.2d 78, 82 [3d Dept 1993], lv denied 82 N.Y.2d 802 [1993], cert denied 511 U.S. 1152 [1994]). Furthermore, if the effects "of governmental action are so complete as to deprive the owner of all or most of his interest in the subject matter, [it has been held] to amount to a taking" (Ruckelshaus v Monsanto Co., 467 U.S. 986, 1005 [1984] [internal quotation marks and citations omitted]; accord Matter of Gazza v New York State Dept. of Envtl. Conservation, 89 N.Y.2d 603, 618-619 [1997]).
The Court holds that the retroactive application of FAPA violates the Takings Clauses of the U.S. and New York constitutions. Narrowly defined, the right directly abrogated by FAPA is plaintiff's right to stop the running of the statute of limitations by de-accelerating the loan, not the lien itself or plaintiff's right to foreclose based on defendant's default. A mortgagor has no vested property right in the ability to de-accelerate the loan and stop the running of the statute of limitations, as this rule was established via a Court of Appeals decision (see Freedom Mtge. Corp. v Engel, 37 N.Y.3d at 31-32), not a statute, and "[a] person has no property, no vested interest, in any rule of the common law" (Duke Power Co. v Carolina Environmental Study Group, Inc, 438 U.S. 59, 88 n 32 [1978]; see e.g. Rushmore Loan Mgt. Servs., LLC v Petti, 2024 WL 219017, *4 [Sup Ct, Richmond County 2024]; U.S. Bank Trust, N.A. v Miele, 80 Misc.3d at 851-852).
However, practically, under the facts of this case, the retroactive application of FAPA abrogates far more than plaintiff's right to stop the running of the statute of limitations by de-accelerating the loan. The retroactive application of FAPA here turns back the clock to render the instant action time-barred when it was not, under the law at the time of commencement, untimely. When taken in conjunction with defendant's RPAPL 1501 (4) and RPL § 282 counterclaims, this has the effect of barring plaintiff's foreclosure claim and giving defendant, who has been in default on his mortgage since 2008 and owed $771,752.53 as of November 2023 (NYSCEF Docs. No. 38, 100), the property free and clear of any mortgage, as well as counsel fees. This would constitute a windfall to defendant, and a taking of plaintiff's interest in the property itself.
Clearly, the retroactive application of FAPA would have a severe economic impact on plaintiff. Equally clear is that this retroactive application would substantially interfere with plaintiff's reasonable investment-backed expectations. Plaintiff may not have a vested right in manipulating the statute of limitations on a foreclosure action at will, but it certainly has a vested right to foreclose on the mortgage in the event of defendant's default, as this is an equitable right that it is well-settled that mortgagees have (see e.g. Wyoming County Bank & Trust Co. v Kiley, 75 A.D.2d 477, 480 [4th Dept 1980]). The retroactive application of FAPA reaches back in time and effectively takes that right from plaintiff. Moreover, the character of governmental action is unusual, singling certain mortgagees out and forcing them to bear the full costs of losing foreclosure actions that were conducted in accordance with then-existing law. Finally, the retroactive application of this law will likely have a negative impact on borrowers throughout New York, as lenders will pass the costs of these losses onto borrowers and will be incentivized not to de-accelerate foreclosure actions, even if borrowers have the ability to resume payments, for fear of running afoul of the statute of limitations. Therefore, the Court concludes that the retroactive application of FAPA is an unconstitutional taking, as it has the effect of depriving plaintiff of its entire interest in the property without just compensation (see Eastern Enterprises v Apfel, 524 U.S. 498, 5302-538 [1998]; Gazza v New York State Dept. of Envtl. Conservation, 89 N.Y.2d at 618-619). As FAPA includes a severability clause, this judgment only renders unconstitutional that part of FAPA which states that it takes effect immediately and applies to all mortgage foreclosure actions in which a final judgment of foreclosure and sale has not yet been enforced (see L 2022, ch 821 § 9, 10).
V. Defendant's RPAPL 1501 (4) and RPL § 282 Counterclaims
In his answer, defendant asserted a counterclaim pursuant to RPAPL 1501 (4) to cancel and discharge the mortgage on the property and a counterclaim pursuant to RPL § 282 for counsel fees. "Where the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage... has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action against any other person or persons... to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom[.] In any action brought under this section it shall be immaterial whether the debt upon which the mortgage or lien was based has, or has not, been paid" (RPAPL 1501 [4]). Under RPL § 282, "'a covenant contained in a mortgage on residential real property' that permits the mortgagee to recover attorney fees in a foreclosure action gives rise to an implied reciprocal covenant by the mortgagee in favor of the mortgagor," which provides that "the mortgagee shall 'pay to the mortgagor the reasonable attorneys' fees and/or expenses incurred by the mortgagor in the successful defense of any action or proceeding commenced by the mortgagee against the mortgagor arising out of the contract'" (21647 LLC v MTGLQ Invs., L.P., 77 Misc.3d 577, 580 [Sup Ct, NY County 2022] [quoting RPAPL 282 (1)]).
In light of the holding above, defendant is not entitled to the cancellation and discharge of the mortgage on the property or counsel fees. The retroactive application of FAPA is unconstitutional, so it does not operate to render plaintiff's action time-barred. Therefore, the period in which plaintiff is permitted to bring a foreclosure action had not expired when the instant action was commenced, and defendant has not successfully defended the foreclosure action.
Any remaining arguments not specifically addressed herein have been considered and found to be lacking in merit or need not be reached in light of this determination.
Accordingly, it is hereby
ORDERED that the branch of defendant's cross-motion which was for leave to renew pursuant to CPLR 2221 (e) is granted; and it is further
ORDERED that the September 28, 2022 Decision and Order of this Court is vacated; and it is further
ORDERED that § 10 of FAPA, which provides that FAPA applies to all pending actions in which a judgment of foreclosure and sale has not been enforced, is unconstitutional under the Contracts Clause of the United States Constitution and the Takings Clauses of the United States and New York constitutions; and it is further
ORDERED that plaintiff is entitled to summary judgment as set forth in the September 28, 2022 Decision and Order of this Court; and it is further
ORDERED that the branch of defendant's cross-motion that was for summary judgment canceling and discharging the subject mortgage pursuant to RPAPL 1501 (4) is denied; and it is further
ORDERED that the branch of defendant's cross-motion that was for counsel fees pursuant to RPL § 282 (1) is denied.
The foregoing shall constitute the Decision and Order of this Court. The signing of this Decision and Order shall not constitute filing, entry, service, or notice of entry under CPLR 2220 and § 202.5-b(h)(2) of the Uniform Rules for the New York State Trial Courts. The parties are not relieved from the applicable provisions of those rules with respect to service and notice of entry of the Decision and Order.
SO ORDERED.
PAPERS CONSIDERED:
1. Notice of Motion to Confirm the Referee Report and for a Judgment of Foreclosure and Sale, together with the affirmation in support of Anthony J. Rooney, Esq., and Exhibits A through R;
2. Notice of Cross-Motion for Leave to Renew, dated January 23, 2024, together with the affirmation in support of Marlene Morales Melo, Esq., memorandum in opposition to motion and in support of cross-motion of Marlene Morales Melo, Esq.;
3. Affirmation in Opposition to Cross-Motion of Amber Jurek, Esq., together with a letter and proof of service on the Attorney General of plaintiff's challenge to the constitutionality of FAPA; and
4. Affirmation in Reply of Marlene Morales Melo, Esq; together with Exhibits A through E and a memorandum of law in reply of Marlene Morales Melo, Esq.