Fed. Nat'l Mortg. Ass'n ("Fannie Mae") v. Tortora

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: Opinion by Curran, J.
• Citation: Fed. Nat'l Mortg. Ass'n ("Fannie Mae") v. Tortora, 188 A.D.3d 70, 131 N.Y.S.3d 763 (N.Y. App. Div. 2020)
• Decision Date: 02 October 2020
• Docket Number: CA 18-02343,1299/19
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE"), a Corporation Organized and Existing Under the Laws of the United States of America, Plaintiff-Appellant, v. Claude TORTORA, Also Known as Claude Totora, Also Known as Claude T. Tortora, Defendant-Respondent, et al., Defendants. (Action No. 1.) Claude Tortora, Individually, and as Executor of the Estate of Jacqueline Squitieri, Deceased, Plaintiff-Respondent, v. Federal National Mortgage Association ("Fannie Mae"), a Corporation Organized and Existing Under the Laws of the United States of America, Defendant-Appellant. (Action No. 2.) (Appeal No. 1.)

188 A.D.3d 70

131 N.Y.S.3d 763

FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE"), a Corporation Organized and Existing Under the Laws of the United States of America, Plaintiff-Appellant,

v.Claude TORTORA, Also Known as Claude Totora, Also Known as Claude T. Tortora, Defendant-Respondent, et al., Defendants. (Action No. 1.)

Claude Tortora, Individually, and as Executor of the Estate of Jacqueline Squitieri, Deceased, Plaintiff-Respondent,

v.Federal National Mortgage Association ("Fannie Mae"), a Corporation Organized and Existing Under the Laws of the United States of America, Defendant-Appellant. (Action No. 2.) (Appeal No. 1.)

1299/19

CA 18-02343

Supreme Court, Appellate Division, Fourth Department, New York.

Entered October 2, 2020

HOGAN LOVELLS US LLP, NEW YORK CITY (CHAVA BRANDRISS OF COUNSEL), FOR PLAINTIFF-APPELLANT AND DEFENDANT-APPELLANT.

WEBSTER & DUBS, P.C., BUFFALO (DANIEL WEBSTER OF COUNSEL), FOR DEFENDANT-RESPONDENT AND PLAINTIFF-RESPONDENT.

PRESENT: CENTRA, J.P., CARNI, LINDLEY, CURRAN, AND WINSLOW, JJ.

OPINION AND ORDER

Opinion by Curran, J.:

It is hereby ORDERED that the amended order so appealed from is unanimously affirmed without costs.

The main issue on appeal in these consolidated actions is whether in action No. 1 the applicable statute of limitations has expired, precluding Federal National Mortgage Association, the plaintiff in action No. 1 and the defendant in action No. 2 (Fannie Mae), from foreclosing a mortgage given by decedent Jacqueline Squitieri, mother of the plaintiff in action No. 2, who is also a defendant in action No. 1 (Tortora). In particular, this appeal presents a novel question for this Court: whether a reinstatement provision in the subject mortgage that gives the mortgagor the option, under some circumstances, to de-accelerate the full mortgage debt prevented the mortgagee from validly accelerating the full mortgage debt and thereby prevented accrual of the foreclosure action for statute of limitations purposes. We answer that question in the negative.

I

The subject property, a residence located in Amherst, New York, was purchased in 2007 by Squitieri by means of a loan secured by a 30-year mortgage. The mortgage is a uniform instrument issued by Fannie Mae, among others, for use in New York State and contains several provisions that are relevant on appeal. Section 22 (acceleration provision) permits the lender to require immediate payment of the loan in full upon the borrower's default, provided certain conditions are met. Section 19 (reinstatement provision) grants a borrower in default the right to effectively de-accelerate the maturity of the mortgage debt by paying in full the past due amount, thereby returning the loan to its pre-default status. Additionally, section 3 (a) requires the borrower to pay certain amounts necessary for taxes and insurance, and sections 4 and 9 require the borrower to pay certain liens on the property and to reimburse the lender for amounts spent to protect the lender's rights in the property should the borrower fail to comply with the mortgage (collectively, authorized advances). In this case, authorized advances were paid by the lender's loan servicers on behalf of the borrower.

Squitieri defaulted on the loan in October 2008. In April 2009, Fannie Mae's predecessor in interest commenced a foreclosure action (first foreclosure action), stating in the complaint that it "elected and hereby elects to declare immediately due and payable the entire unpaid balance of principal" on the mortgage debt. In July 2012, Supreme Court dismissed the first foreclosure action, without prejudice, based on the predecessor in interest's failure to supply a reasonable explanation for its inactivity in prosecuting the action.

In April 2013, the predecessor in interest commenced another foreclosure action (second foreclosure action) against, among others, Squitieri and Tortora, the latter of whom was initially named as a John Doe occupant of the property, based again on the 2008 default. Following assignment of the mortgage to it in 2014, Fannie Mae was substituted as plaintiff in the second foreclosure action and obtained a default judgment against Tortora and Squitieri, among others. Fannie Mae subsequently moved for a judgment of foreclosure and sale. In March 2015, however, the court denied that motion and instead dismissed the complaint with prejudice based on Fannie Mae's repeated failure to appear in support of its motion.

In August 2016, Squitieri commenced action No. 2—an action to quiet title to the subject property—seeking, inter alia, a determination that the mortgage was void and should be cancelled. Squitieri asserted that the full amount of the mortgage debt had been accelerated in 2009 and could no longer be enforced due to the expiration of the six-year statute of limitations. In its answer, Fannie Mae asserted, inter alia, a counterclaim to recover the amount of authorized advances paid by the loan servicer on behalf of Squitieri plus interest on those advances. Squitieri died in April 2017. She had previously transferred the subject property to Tortora by quitclaim deed dated May 2015, which was filed with the county clerk's office following her death.

In February 2018, Fannie Mae commenced action No. 1, a foreclosure action predicated on a default dating back to March 2012, seeking the principal amount of the mortgage debt, with interest. In his answer, Tortora alleged, as his only affirmative defense, that action No. 1 was barred by the statute of limitations because the debt had been accelerated in 2009 and more than six years had elapsed since then. Tortora thereafter moved for, inter alia, consolidation of the actions, substitution as plaintiff in action No. 2, summary judgment on the complaint in action No. 2, and summary judgment dismissing the complaint against him in action No. 1 as time-barred. Fannie Mae cross-moved, inter alia, to strike the statute of limitations defense in action No. 1 and for summary judgment dismissing the complaint in action No. 2 or, alternatively, summary judgment on its counterclaim in action No. 2.

Fannie Mae appeals from an amended order that, inter alia, denied the cross motion and granted that part of the motion seeking dismissal of the complaint in action No. 1 against Tortora as time-barred. We affirm.

II

A

The court did not err in granting that part of the motion seeking summary judgment dismissing the complaint against Tortora in action No. 1, insofar as Fannie Mae sought to recover the principal amount of the mortgage debt, as barred by the applicable six-year statute of limitations (see CPLR 213 [4] ). The statute of limitations in an action to foreclose on a mortgage "begins to run once the debt has been accelerated by a demand" ( Business Loan Ctr., Inc. v. Wagner , 31 A.D.3d 1122, 1123, 818 N.Y.S.2d 406 [4th Dept. 2006] ). "Acceleration occurs, inter alia, by the commencement of a foreclosure action" ( Deutsche Bank Natl. Trust Co. v. Adrian , 157 A.D.3d 934, 935, 69 N.Y.S.3d 706 [2d Dept. 2018] ; see U.S. Bank N.A. v. Balderston , 163 A.D.3d 1482, 1483-1484, 83 N.Y.S.3d 382 [4th Dept. 2018] ; Fannie Mae v. 133 Mgt., LLC , 126 A.D.3d 670, 670, 2 N.Y.S.3d 361 [2d Dept. 2015] ). Moreover, "even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the [s]tatute of [l]imitations begins to run on the entire debt " ( EMC Mtge. Corp. v. Patella , 279 A.D.2d 604, 605, 720 N.Y.S.2d 161 [2d Dept. 2001] [emphasis added]; see Wilmington Sav. Fund Socy., FSB v. Gustafson , 160 A.D.3d 1409, 1410, 76 N.Y.S.3d 328 [4th Dept. 2018] ).

Here, we conclude that Tortora met his initial burden on the motion of establishing, "prima facie[,] that the time in which to sue ha[d] expired" ( Chaplin v. Tompkins , 173 A.D.3d 1661, 1662, 103 N.Y.S.3d 713 [4th Dept. 2019] [internal quotation marks omitted]; see Larkin v. Rochester Hous. Auth. , 81 A.D.3d 1354, 1355, 916 N.Y.S.2d 694 [4th Dept. 2011] ). He did so by submitting evidence establishing that the full amount of the mortgage debt was accelerated in April 2009, when Fannie Mae's predecessor in interest commenced the first foreclosure action (see U.S. Bank N.A. , 163 A.D.3d at 1483-1484, 83 N.Y.S.3d 382 ; Wilmington Sav. Fund Socy., FSB , 160 A.D.3d at 1410, 76 N.Y.S.3d 328 ; EMC Mtge. Corp. , 279 A.D.2d at 605, 720 N.Y.S.2d 161 ). Indeed, the predecessor in interest specifically stated in its complaint in that action that it "elected and hereby elects to declare immediately due and payable the entire unpaid balance of principal" on the mortgage debt (emphasis added). Because Fannie Mae did not commence action No. 1 until 2018, more than six years after the debt was accelerated, Tortora established that the statute of limitations had expired, requiring dismissal of that action (see CPLR 213 [4] ; Larkin , 81 A.D.3d at 1355, 916 N.Y.S.2d 694 ).

B

In opposition, Fannie Mae did not raise an issue of fact whether the full mortgage debt was accelerated in 2009 (see North Shore Invs. Realty Group, LLC v. Traina , 170 A.D.3d 737, 738, 95 N.Y.S.3d 277 [2d Dept. 2019] ; see generally Zuckerman v. City of New York , 49 N.Y.2d 557, 562, 427 N.Y.S.2d 595, 404 N.E.2d 718 [1980] ). Fannie Mae's central contention is that the mortgage debt could not have been accelerated in 2009; rather, it could only be accelerated once there was a final judgment of foreclosure inasmuch as the reinstatement provision of the mortgage precludes earlier acceleration of the full debt by granting the borrower the right to restore the loan to its pre-default status until the time of final judgment.

As Fannie Mae notes, however, the Second Department recently rejected that argument in Bank of N.Y. Mellon v. Dieudonne, 171 A.D.3d 34, 39-40, 96 N.Y.S.3d 354 [2d Dept. 2019], lv denied 34 N.Y.3d 910, 2020 WL 768939 [2020] [hereafter, Dieudonne ], a case involving a mortgage identical to the one at issue here. Inasmuch as we agree with the Second Department...