Opinion
Index No. 64020/2019
03-16-2023
MTGLQ INVESTORS, L.P., Plaintiff v. Steven GROSS; Jacqueline Gross ; Matt Gross ; Alexa Gross, Defendant
Knuckles, Komosinski & Manfro, LLP, Upper Saddle River, New Jersey (Louis A. Levithan of counsel), for plaintiff. Clair, Gjertsen & Weathers, PLLC, White Plains (Mary Kathryn Aufrecht of counsel), for defendants.
Knuckles, Komosinski & Manfro, LLP, Upper Saddle River, New Jersey (Louis A. Levithan of counsel), for plaintiff.
Clair, Gjertsen & Weathers, PLLC, White Plains (Mary Kathryn Aufrecht of counsel), for defendants.
Hal B. Greenwald, J. RELEVANT BACKGROUND
By Decision and Order (Walker, J.) dated May 9, 2022 (the "Walker Decision") granted summary judgment in favor of Plaintiff in the pending residential foreclosure action, and an Order of Reference (Walker, J) dated May 9, 2022.
Defendants filed the instant motions seeking leave to renew, based on a change in the law. On June 24, 2022, Defendants filed a Notice of Motion (Motion Sequence 3), arguing the change in the law would render a different determination in the instant matter as Bank of Am., N.A. v. Kessler , determined that RPAPL 1304 notices which contain additional information that are not part of the statutory requirement, were invalid notices. Defendants proffer that the notices in the instant foreclosure proceeding contained more than the statutory requirement and as such are invalid notices, thus, Plaintiff would not be entitled to summary judgment. However, without going into Plaintiff's opposition for said motion, this argument fails, as months later the decision was reversed. See, Bank of Am., N.A. v. Kessler , 202 A.D.3d 10, 11, 160 N.Y.S.3d 277 (2nd Dept. 2021), rev'd, 39 N.Y.3d 317, 186 N.Y.S.3d 85, 206 N.E.3d 1228 (Ct. App. Feb. 14, 2023). Thus, Motion Sequence 3 is in essence denied , as the change in the law is now irrelevant.
However, Defendants’ other motion (Motion Sequence 4) was filed on October 17, 2022, and also seeks leave to renew based on a change in the law. Defendants assert Plaintiff is barred by res judicata in the instant action based on the holding from Emigrant Bank v. Solimano , which determined that the dismissal of a complaint has a res judicata effect, and precludes a future potential action on the same alleged mortgage default. See, Emigrant Bank v. Solimano , 209 A.D.3d 153, 162, 175 N.Y.S.3d 299 (2nd Dept. 2022).
A conference was scheduled for January 17, 2023, with Principal Law Clerk, Christa Harper, Esq., and counsel for each party appeared. At that time Defendant asked for the opportunity to submit another motion or supplemental affidavit as to the Foreclosure Abuse Prevention Act ("FAPA"), in furtherance of the relief requested by Defendants. The Court allowed both parties respectively to submit supplemental papers on the singular issue.
Defendants contend that based upon FAPA, the acceleration of the mortgage debt began to run from the commencement of the 2010 Action, thus the prior discontinuance did not act to waive, postpone, cancel, toll, extend, revive, or reset the limitations period. Defendants argue that the statute of limitations would have expired on September 10, 2016. Defendants argue further that the instant action filed on September 9, 2019, is barred as the six-year statute of limitations has run herein and the Court should grant summary judgment and quiet title in favor of Defendants and dismiss the instant complaint.
Plaintiff opposed the motions and submitted a supplemental reply opposing Defendants arguments related to FAPA. Plaintiff argues that the doctrine of res judicata does not apply to the instant matter. Plaintiff states that Solimano was based upon Plaintiff's failure to prove its case in the prior action in its entirety, not solely upon conditions precedent, and therefore warranted the preclusive effect given to the Judgment in the prior action, which is not the case in the instant matter. Plaintiff declares that the 2014 Action dismissal was not on the merits, thus res judicata is inapplicable to the instant matter. Plaintiff argues further that FAPA is also inapplicable to the instant matter. Plaintiff states that the 2010 Action cannot be used to set the statute of limitations for this foreclosure action. Plaintiff contends that the earliest date the statute of limitations could possibly run from is the date of the commencement of the 2014 Action on December 31, 2014, pursuant to the Court of Appeals Decision in Freedom Mortgage v. Engel which held that a voluntary discontinuance of a foreclosure action is sufficient to revoke any prior acceleration and decelerate the debt. 37 N.Y.3d 1, 19, 146 N.Y.S.3d 542, 547, 169 N.E.3d 912 (2021). Plaintiff argues that FAPA is a procedural statute, therefore it cannot have retroactive application, as such would impair Plaintiff's rights herein.
DISCUSSION
A party who seeks leave to renew pursuant to CPLR 2221(e) shall be based upon new facts not offered on a prior motion that would change the prior determination and shall contain reasonable justification for the failure to present such facts on the prior motion. Alternatively, a motion for renewal may rest upon a demonstration that there has been a change in the law that would change the prior determination. ( CPLR 2221[e][2] ). See, Deutsche Bank Natl. Tr. Co. for Holders of First Franklin Mtge. Loan Tr. 2006-FF7, Mtge. Pass-Through Certificates Series 2006-FF7 v. Dormer , 60 Misc.3d 550, 552, 78 N.Y.S.3d 626 (Sup. Ct. 2018).
The Doctrine of Res Judicata
In an action to foreclose a mortgage, a plaintiff establishes its case as a matter of law through the production of the mortgage, the unpaid note, and evidence of default. A plaintiff has standing to maintain a mortgage foreclosure action where it is the holder or assignee of the underlying note at the time the action is commenced. Under the doctrine of res judicata, or claim preclusion, a disposition on the merits bars litigation between the same parties, or those in privity with them, of a cause of action arising out of the same transaction or series of transactions as a cause of action that either was raised or could have been raised in [a] prior proceeding. Contrary to the defendants’ contention, a dismissal premised on lack of standing is not a dismissal on the merits for res judicata purposes. See, Selene Fin., L.P. v. Coleman , 187 A.D.3d 1082, 134 N.Y.S.3d 357 (2nd Dept. 2020).
In Emigrant Bank v. Solimano , the court found that the dismissal of a complaint had a res judicata effect, when the case was dismissed on the merits, absent some circumstance that would warrant the exercise of the court's discretion. For instance, a court should not exercise its discretion to specify otherwise where the proponent will not be able to prevail on its claim, such as where the claim is barred by the statute of limitations; but the court may do so where it appears that proof is available to the proponent that will readily enable it to establish a prima facie case. See, Emigrant Bank v. Solimano , 209 A.D.3d 153, 162-63, 175 N.Y.S.3d 299 (2nd Dept. 2022).
Here, Defendants’ argument that res judicata applies based on the change in the law is erroneous. While there are many similarities between these two cases, Solimano , is distinguishable from the case herein. In Solimano the complaint was dismissed because Plaintiff failed to prove standing, and Plaintiff failed to establish compliance with notice. However, in the instant matter the basis for the judgment to dismiss the complaint was stated that Plaintiff failed to establish that it satisfied conditions precedent to the commencement of the instant action. See, Id. ; see also, NYSCEF Doc. No. 98, Plaintiff's Exhibit 1, Judgment (Davidson, J.) dated May 28, 2019 (the "Judgment").
Proper service of the RPAPL 1304 notice containing the statutorily mandated content is a condition precedent to the commencement of the foreclosure action. See, U.S. Bank N.A. v. Levine , 52 Misc.3d 736, 738, 36 N.Y.S.3d 786 (Sup. Ct. 2016). Notice and remedy provisions are not substantive elements of the cause of action, but instead limitations on the remedy for a breach of the mortgage loan representations and warranties. They serve as a precondition, a procedural prerequisite to suit, not a separate undertaking by the trustee. Notice and sole remedy provisions do not create a substantive condition precedent, they do not affect when the statute of limitations commences. It has been held, for example, that a dismissal arising from the failure of a condition precedent to the right to bring suit is not a final judgment upon the merits for purposes of CPLR 205 (a). See, U.S. Bank N.A. v. DLJ Mtge. Capital, Inc. , 33 N.Y.3d 72, 80, 98 N.Y.S.3d 523, 122 N.E.3d 40 (2019) and Carrick v. Cent. Gen. Hosp. , 51 N.Y.2d 242, 251-52, 434 N.Y.S.2d 130, 414 N.E.2d 632 (1980). It is only when the condition precedent is attached to a specific time period for compliance wholly dehors and without reference to the statute does rigor mortis of the action loom. See, Morris Inv'rs, Inc. v. Commr. of Fin. of City of New York , 121 A.D.2d 221, 227, 503 N.Y.S.2d 363 (1st Dept. 1986), aff'd, Matter of , 69 N.Y.2d 933, 516 N.Y.S.2d 635, 509 N.E.2d 329 (1987). Defendants admit that Plaintiff commenced the instant matter within the statute of limitations. As such, Plaintiff has not violated the specific time period that would have terminated this action, and a dismissal or judgment arising from the failure to comply with a condition precedent is not a final judgment upon the merits.
The judgment itself does not make the subject matter the "merits" of the case. Case law does not recognize conditions precedent as the merits of the case. Defendants have not demonstrated that a condition precedent, by itself has been deemed the merits of a case for which res judicata applies. Even Solimano , the case which Defendants propose as a change in the law, recognizes that there are exceptions to the general rule, so that where it appears that proof could be available to the proponent, which would enable it the establish its prima facie case, the court can exercise its discretion, thus judgment is not on the merits, and does not have any res judicata effect. Thus, there is no basis for the Court to assume that the res judicata is applicable to instant matter. See CPLR 205(a) and Emigrant Bank v. Solimano , 209 A.D.3d 153, 162-63, 175 N.Y.S.3d 299 (2nd Dept. 2022). To that extent, Defendants application for renewal based on a change in the law, asserting that res judicata effects the instant matter is denied.
Foreclosure Abuse Prevention Act
Defendants asserts that based upon the Foreclosure Abuse Prevention Act("FAPA"), this change in the law, would suggest that the instant foreclosure action is time barred, as statute of limitations that should be considered for this action, started in 2010 when the first foreclosure action for said property was commenced and expired prior to the commencement of the 2019 Action and as such, the determination rendered is null. The legislative intent of FAPA is to thwart and eliminate abusive and unlawful litigation tactics that have been adopted and pursued in mortgage foreclosure actions to manipulate the law and judiciary to yield expediency and the convenience of mortgage banking and servicing institutions at the expense of finality and repose that statutes of limitations are meant to insure. See, Wilmington Sav. Fund Socy., FSB v. Madden, 78 Misc.3d 736, 186 N.Y.S.3d 910 (Sup. Ct. Feb. 10, 2023). However, the question raised by Defendants’ argument is whether FAPA, requires the review of all voluntary discontinuances within a case history, or only those relative to the instant determination.
It is well settled law, that procedural statutes may not retroactively destroy rights already accrued. A statute has retroactive effect if it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed, thus impacting substantive rights. Thus, procedural statutes are generally deemed retroactive, but what is really meant is that they apply to pending proceedings, and even with respect to such proceedings, they only affect procedural steps taken after their enactment. On the other hand, a statute that affects only the propriety of prospective relief or the non-substantive provisions governing the procedure for adjudication of a claim going forward has no potentially problematic retroactive effect even when the liability arises from past conduct. See, Wade v. Byung Yang Kim , 250 A.D.2d 323, 325, 681 N.Y.S.2d 355 (2nd Dept. 1998) ; see also, Regina Metro. Co., LLC v. New York State Div. of Hous. and Community Renewal , 35 N.Y.3d 332, 365, 130 N.Y.S.3d 759, 154 N.E.3d 972 (2020). A retroactive law is invalid when it is retrospective and attempts to take away or impair rights vested under existing laws or valid contracts or when it creates a new obligation or attaches a new disability to transactions already past. See, R. Co-op. Bldg. & Loan Ass'n v. Boston Bldg. Estates , 149 Misc. 349, 351, 267 N.Y.S. 204 (Sup. Ct. 1933).
FAPA, is a response instituted to counter the issues raised by Freedom Mtge. Corp. v. Engel , as lenders took advantage of the rule and used voluntary discontinuances, to revoke acceleration of mortgages at issue, thus finagling the onset of the statute of limitations for their own benefit. See, Freedom Mtge. Corp. v. Engel , 37 N.Y.3d 1, 32-33, 146 N.Y.S.3d 542, 169 N.E.3d 912 (2021), rearg. denied, 37 N.Y.3d 926, 146 N.Y.S.3d 865, 169 N.E.3d 1229 (2021). FAPA applies to all foreclosure actions in which a final judgment of foreclosure and sale has not been enforced. FAPA, in part, amends CPLR 3217 (e), as to the effect of discontinuances on the statute of limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute. However, if the application of FAPA retroactively destroys rights already accrued, then FAPA would be invalid. Hence, in matters where actions have been discontinued, and thereafter other actions had been commenced in furtherance of a party's claim FAPA cannot retroactively alter the statutory period determined by the existing law or a prior court's determination.
The voluntary discontinuance in this matter pertains to the 2010 Action, which under the existing law was a revocation of the acceleration of the mortgage debt in that action. At that time there was no FAPA or law that existed to assert that the statute of limitations would not reset by a voluntary discontinuance. Thus, when Plaintiff commenced the 2014 Action, Plaintiff's claim began the clock for the statutory time period of six (6) years. The Decision and Order (Wood, J.) dated July 3, 2017 (the "Wood Decision"), found that Plaintiff had standing in that foreclosure action, but Plaintiff failed to demonstrate that notice requirements were satisfied, thus the action was dismissed. However, Plaintiff's substantive rights to pursue his claim vested and were viable, as there was no determination that the statute of limitations had expired even as the Wood Decision, which was issued seven years after the discontinuance. Plaintiff's commencement of the 2019 Action was deemed timely, not only by the Court but even admitted by the Defendants. See, NYSCEF Doc No. 92 paragraph 11. For the voluntary discontinuance in the 2010 Action to be a factor now, takes away from Plaintiff's substantive rights, rights vested in the prior decisions of the court. While summary judgment is not a final judgment of foreclosure and sale, application of FAPA in the instant matter would have a retroactive effect on Plaintiff's vested rights obtained through the prior determination of the courts. Plaintiff's 2019 Action would be completely disabled, and rendered untimely despite the accrued judgment in its favor under the existing laws. If that is the case, then FAPA could appear to be invalid law.
As courts begin to apply FAPA in foreclosure actions, the court shall encounter varied arguments by both parties in furtherance of their positions. However, the legislative intent of FAPA seeks to remedy foreclosure abuse in actions where Plaintiffs have used voluntary discontinuances to alter the statute of limitations in its favor in a particular action. FAPA was not intended to be used as a means to reach back in the case history and bypass determinations rendered by courts, who have evaluated the facts and evidence within an action, and dismantle such determinations upon a discontinuance that previously had no bearing and now alter the substantive rights of a party. Such an interpretation would have a retroactive effect on a party's substantive and vested rights. For FAPA to not have a retroactive effect, courts must view FAPA in light of the facts and circumstances presented.
Pursuant to CPLR 2221, leave to renew requires the Court to look at the change in the law, that may have impact on the instant determination. The instant determination assessed that the statute of limitations began to run upon the commencement of the 2014 Action and that the 2019 Action was timely commenced. Here, FAPA would not change the determination of the court, as there is an insufficient basis to use the voluntary discontinuance as a baseline for determining the timeliness of the 2019 Action. To do so, would have a retroactive effect and would impair Plaintiff's substantive rights, and posture FAPA to be deemed an invalid law. It would also be contrary to the legislative intent, as this case does not represent the kind of foreclosure abuse that FAPA was enacted to address. To that extent, Defendants application submitted through supplemental papers is denied.
Accordingly, it is hereby,
ORDERED, that Defendants applications for leave to renew under the change in law as to violation of notices (Motion Sequence 3), is deemed moot, as the law was reversed; and it is further
ORDERED, that Defendants applications for leave to renew under the change in law as to the doctrine of res judicata (Motion Sequence 4) is denied; and it is further
ORDERED, that Defendants’ application by way of supplemental papers for leave to renew under the change in law as to the Foreclosure Abuse Prevention Act ("FAPA") is denied; and it is further
ORDERED, that the conference scheduled for March 21, 2023, is now vacated.
Any relief not specifically granted herein is denied.
The foregoing constitutes the decision and order of this Court.