Milone v. U.S. Bank Nat'l Ass'n

• Decision Date: 15 August 2018
• Docket Number: Index No. 100268/15,2016–02068
• Citation: 164 A.D.3d 145,83 N.Y.S.3d 524
• Parties: Diane MILONE, appellant, v. US BANK NATIONAL ASSOCIATION, etc., respondent.
• Court: New York Supreme Court — Appellate Division

164 A.D.3d 145

83 N.Y.S.3d 524

Diane MILONE, appellant,

v.US BANK NATIONAL ASSOCIATION, etc., respondent.

2016–02068

Index No. 100268/15

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

Argued—April 17, 2018

August 15, 2018

DeSocio & Fuccio, P.C., Oyster Bay, N.Y. (James B. Fuccio of counsel), for appellant.

Reed Smith LLP, New York, N.Y. (Diane A. Bettino and Siobhan A. Nolan of counsel), for respondent.

MARK C. DILLON, J.P., CHERYL E. CHAMBERS, SANDRA L. SGROI, FRANCESCA E. CONNOLLY, JJ.

OPINION & ORDER

DILLON, J.P.

The instant appeal provides us with an occasion to address the timeliness and required proofs for the valid de-acceleration of note obligations underlying residential mortgage foreclosure actions.

I. Facts

On September 20, 2004, the plaintiff purchased residential real estate in Staten Island. The transaction included the plaintiff's execution of a note in the sum of $1,235,000, which was secured by a mortgage upon the premises. The lender listed on the note was "Wall Street Mortgage Bankers Ltd. d/b/a Power Express" (hereinafter WSMB). The note provided for, inter alia, interest-only payments due and owing the first of each month for 120 months, with full maturity of the obligation on April 1, 2036. On December 28, 2007, Mortgage Electronic Registration Systems, Inc. (hereinafter MERS), as nominee of WSMB, assigned the mortgage to the defendant, U.S. Bank National Association (hereinafter U.S. Bank).

The plaintiff defaulted on her obligations under the note beginning with the payment due on October 1, 2008, and continuing each month thereafter. By letter dated November 16, 2008, an entity known as America's Servicing Co. (hereinafter ASC) advised the plaintiff that her account was in default, and that if a stated amount of delinquency and fees was not paid within 30 days, the circumstances "will result in the acceleration of your Mortgage Note ... [and that o]nce acceleration has occurred, a foreclosure action, or any other remedy permitted under the terms of your Mortgage or Deed of Trust, may be initiated." The plaintiff did not pay the delinquency and fees, and on January 13, 2009, U.S. Bank commenced a foreclosure action against her in the Supreme Court, Richmond County, by the filing of a summons and complaint with the Richmond County Clerk.

The standing of U.S. Bank, which was not named on the note, must have been an issue between the parties in the foreclosure action, since the Supreme Court executed a preliminary conference order on September 20, 2011, directing U.S. Bank to produce the original note by October 5, 2011. No original note was thereafter produced, and on February 29, 2012, the foreclosure action was dismissed.

Matters lay dormant until October 21, 2014. By letter of that date sent to the plaintiff, Wells Fargo Bank N.A. (hereinafter Wells Fargo), which represented itself as U.S. Bank's loan servicer, noted the plaintiff's continued default on the note. It also stated that Wells Fargo "hereby de-accelerates the maturity of the Loan, withdraws its prior demand for immediate payment of all sums secured by the Security Instrument and re-institutes the loan as an installment loan."

More than four months later, on March 10, 2015, the plaintiff commenced this action pursuant to RPAPL 1501 to cancel and discharge the mortgage and note. The plaintiff specifically alleged that more than six years had passed from ASC's letter of November 16, 2008, by which the note associated with the mortgage was accelerated; that U.S. Bank's foreclosure action had been dismissed; and that no new foreclosure action had been timely commenced.

US Bank moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint in its entirety. US Bank argued, through an affidavit of Wells Fargo's vice president of loan documentation and annexed documentary evidence, that payment of the note, which had previously been accelerated, was de-accelerated by Wells Fargo's letter to the plaintiff dated October 21, 2014. Counsel for U.S. Bank reasoned that since the de-acceleration was communicated within six years of the earlier acceleration, no violation of the statute of limitations occurred, and a new six-year limitations period would begin to run if U.S. Bank were to accelerate the note in the future.

The plaintiff cross-moved for summary judgment on the complaint. In support of her cross motion, and in opposition to U.S. Bank's dismissal motion, the plaintiff argued that no right of de-acceleration was contained in the note or mortgage; that U.S. Bank's decision to de-accelerate rather than to commence a new action within the original six years is a tacit admission that it does not possess the original note; that once an acceleration option is exercised, it cannot be revoked; that construing the note and mortgage as allowing a de-acceleration and extending the statute of limitations would violate public policy; and that the purported de-acceleration was per se prejudicial to the borrower.

In the order appealed from, the Supreme Court, without analysis, granted U.S. Bank's motion to dismiss the complaint with prejudice, and denied the plaintiff's cross motion for summary judgment on the complaint.

For reasons set forth below, we modify the order appealed from. While we agree with the Supreme Court's determination to deny the plaintiff's cross motion for summary judgment on the complaint, we conclude that the court also should have denied U.S. Bank's motion to dismiss the complaint.

II. Legal Analysis

US Bank's motion to dismiss and the plaintiff's cross motion for summary judgment are governed by different standards of proof. Therefore, if one party loses its motion, that result does not necessarily require that the other party prevails, since each motion must be measured by its own discrete standard of proof.

The required forms of proof are well established. A motion to dismiss pursuant to CPLR 3211(a)(1) on the ground of documentary evidence may only be granted where the documentary evidence utterly refutes the plaintiff's allegations, conclusively establishing a defense as a matter of law (see Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 ; Hutton Group, Inc. v. Cameo Owners Corp., 160 A.D.3d 676, 75 N.Y.S.3d 193 ; Hershco v. Gordon & Gordon, 155 A.D.3d 1007, 1008, 66 N.Y.S.3d 37 ). On a motion to dismiss a complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must accept the facts alleged in the complaint as true and afford the plaintiff the benefit of every favorable inference, and determine only whether the facts alleged fit within any cognizable legal theory (see Leon v. Martinez, 84 N.Y.2d 83, 87, 614 N.Y.S.2d 972, 638 N.E.2d 511 ; Hershco v. Gordon & Gordon, 155 A.D.3d at 1008, 66 N.Y.S.3d 37 ; Cruciata v. O'Donnell & McLaughlin, Esqs., 149 A.D.3d 1034, 1034–1035, 53 N.Y.S.3d 328 ). A motion for summary judgment, by contrast, may be granted only if the movant tenders sufficient evidence in admissible form demonstrating, prima facie, the absence of triable issues of fact (see Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 501 N.E.2d 572 ; Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853, 487 N.Y.S.2d 316, 476 N.E.2d 642 ; Zuckerman v. City of New York, 49 N.Y.2d 557, 562, 427 N.Y.S.2d 595, 404 N.E.2d 718 ). If that burden is met, the burden shifts to the party opposing the motion to produce evidentiary proof in an admissible form establishing the existence of material issues of fact requiring trial (see Zuckerman v. City of New York, 49 N.Y.2d at 562, 427 N.Y.S.2d 595, 404 N.E.2d 718 ).

A. The Statute of Limitations for Mortgage Debt Accelerations

The cause of action in the complaint to cancel and discharge the mortgage and note is governed by RPAPL 1501(4). The statute provides that a person with an estate or interest in real property subject to an encumbrance may maintain an action to secure the cancellation and discharge of the encumbrance, and to adjudge the estate or interest free of it, if the applicable statute of limitations for commencing a foreclosure action has expired (see RPAPL 1501[4] ; Lubonty v. U.S. Bank N.A., 159 A.D.3d 962, 74 N.Y.S.3d 279 ; 53 PL Realty, LLC v. U.S. Bank N.A., 153 A.D.3d 894, 61 N.Y.S.3d 120 ; Kashipour v. Wilmington Sav. Fund Socy., FSB, 144 A.D.3d 985, 986, 41 N.Y.S.3d 738 ). Actions to foreclose upon a mortgage are governed by a six-year statute of limitations (see CPLR 213[4] ; Wells Fargo Bank, N.A. v. Eitani, 148 A.D.3d 193, 197, 47 N.Y.S.3d 80 ; Kashipour v. Wilmington Sav. Fund Socy., FSB, 144 A.D.3d at 986, 41 N.Y.S.3d 738 ; Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d 980, 943 N.Y.S.2d 540 ). When a mortgage is payable in installments, which is the typical practice, an acceleration of the entire amount due begins the running of the statute of limitations on the entire debt (see U.S. Bank N.A. v. Joseph, 159 A.D.3d 968, 73 N.Y.S.3d 238 ; Stewart Tit. Ins. Co. v. Bank of N.Y. Mellon, 154 A.D.3d 656, 659, 61 N.Y.S.3d 634 ; 53 PL Realty, LLC v. U.S. Bank N.A., 153 A.D.3d at 895, 61 N.Y.S.3d 120 ; NMNT Realty Corp. v. Knoxville 2012 Trust, 151 A.D.3d 1068, 1069, 58 N.Y.S.3d 118 ; Nationstar Mtge., LLC v. Weisblum, 143 A.D.3d 866, 867, 39 N.Y.S.3d 491 ; EMC Mtge. Corp. v. Patella, 279 A.D.2d 604, 605, 720 N.Y.S.2d 161 ). Determining precisely when a mortgage is accelerated is therefore a key aspect in any action or proceeding commenced pursuant to RPAPL 1501(4).

An acceleration of a mortgage debt may occur in different ways. One way is in the form of an acceleration notice transmitted to the borrower by the creditor or the creditor's servicer. To be effective, the acceleration notice to the borrower must be clear and unequivocal (see Nationstar Mtge., LLC v. Weisblum, 143 A.D.3d at 867, 39 N.Y.S.3d 491 ; Wells Fargo Bank, N.A. v. Burke, 94 A.D.3d at 983, 943 N.Y.S.2d 540 ; Sarva v. Chakravorty, 34 A.D.3d 438, 439, 826 N.Y.S.2d 74 ). A second form of acceleration,...