U.S. Bank Nat'l Ass'n v. Creative Encounters LLC

• Decision Date: 14 May 2020
• Docket Number: 529451
• Citation: 124 N.Y.S.3d 92,183 A.D.3d 1086
• Parties: U.S. BANK NATIONAL ASSOCIATION, as Trustee, Respondent, v. CREATIVE ENCOUNTERS LLC et al., Appellants, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

183 A.D.3d 1086

124 N.Y.S.3d 92

U.S. BANK NATIONAL ASSOCIATION, as Trustee, Respondent,

v.CREATIVE ENCOUNTERS LLC et al., Appellants, et al., Defendants.

529451

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

Decided and Entered: May 14, 2020

Calendar Date: February 10, 2020

MEMORANDUM AND ORDER

Lynch, J.P.

Appeal from an order of the Supreme Court (Melkonian, J.), entered April 24, 2019 in Rensselaer County, which, among other things, denied a motion by defendants Creative Encounters LLC and Paula Jo Tufano for summary judgment dismissing the complaint against them.

In May 2005, defendant Paula Jo Tufano and her husband borrowed a sum of money from plaintiff's predecessor in interest and executed a note secured by a mortgage on the property located in the Town of East Greenbush, Rensselaer County. In June 2008, Tufano borrowed an additional sum and executed a note secured by a mortgage on the same property. The two loans were consolidated in a consolidation, extension and modification agreement (hereinafter CEMA), which reflected a total unpaid principal balance of $182,000. The CEMA was assigned to BAC Home Loans Servicing, L.P. In August 2010, BAC commenced a foreclosure action arising from Tufano's failure to make the October 2009 payment. Thereafter, Tufano transferred her interest in the property to defendant Creative Encounters LLC by a quitclaim deed.

In September 2013, Supreme Court (Ceresia Jr., J.) granted BAC's motion to discontinue the action without prejudice "due to title insurability issues." In October 2014, Nationstar Mortgage, LLC – the second assignee of the CEMA – commenced a second action to foreclose on the mortgage. In March 2016, this action was also discontinued when Supreme Court (McGrath, J.) granted Nationstar's motion to discontinue without prejudice "due to title insurability issues." The CEMA was assigned to plaintiff, which commenced this third foreclosure action in April 2017 against Tufano and Creative Encounters (hereinafter collectively referred to as defendants), among others. Thereafter, Supreme Court (Melkonian, J.) denied defendants' motion for summary judgment, seeking to dismiss the complaint as time-barred, and granted plaintiff's motion for a judgment of foreclosure and sale. Defendants appeal.

Where, as here, a mortgage debt has been accelerated by the commencement of an action seeking the entire sum due, the six-year statute of limitations begins to run (see Lavin v. Elmakiss, 302 A.D.2d 638, 639, 754 N.Y.S.2d 741 [2003], lv dismissed 100 N.Y.2d 577, 764 N.Y.S.2d 386, 796 N.E.2d 478 [2003], lv denied 2 N.Y.3d 703, 778 N.Y.S.2d 462, 810 N.E.2d 915 [2004] ). Once a debt has been accelerated, a lender's "election ... could be revoked only through an affirmative act occurring within the statute of limitations period" ( id. ). To that end, "acceleration notices must be clear and unambiguous to be valid and enforceable ... [and] de-acceleration notices must also be clear and unambiguous to be valid and enforceable" ( Milone v. U.S. Bank N.A., 164 A.D.3d 145, 153, 83 N.Y.S.3d 524 [2018] [internal citations omitted], lv dismissed 34 N.Y.3d 1009, 115 N.Y.S.3d 205, 138 N.E.3d 1088 [2019] ).

Here, defendants met their initial burden of demonstrating that the action was untimely. The statute of limitations was triggered in August 2010 with the commencement of the first action, and this third action was commenced more than six years later in April 2017 (see Bank of N.Y. Mellon v. Craig, 169 A.D.3d 627, 629, 93 N.Y.S.3d 425 [2019] ; Freedom Mtge. Corp. v. Engel, 163 A.D.3d 631, 633, 81 N.Y.S.3d 156 [2018], lv partially granted and partially dismissed 33 N.Y.3d 1039, 103 N.Y.S.3d 12, 126 N.E.3d 1052 [2019] ).¹ As such, the burden shifted to plaintiff to raise a question of fact as to whether the action was timely. In our view, plaintiff failed to do so.

In Milone v. U.S. Bank N.A., 164 A.D.3d at 154, 83 N.Y.S.3d 524 – a case addressing whether a letter from the lender effected a valid de-acceleration – the Second Department reasoned that "a de-acceleration letter is not pretextual if ... it contains an express demand for monthly payments on the note, or, in the absence of such express demand, it is accompanied by copies of the monthly invoices transmitted to the homeowner for installment payments, or ... other forms of evidence demonstrating that the lender was truly seeking to de-accelerate and not attempting to achieve another purpose under the guise of de-acceleration" ( id. ). The letter under review in Milone stated that the lender "hereby de-accelerates the maturity of the [l]oan, withdraws its prior demand for immediate payment of all sums secured by the [s]ecurity [i]nstrument and re-institutes the loan as an installment loan" ( id. at 149, 83 N.Y.S.3d 524 [quotation marks omitted]; see Wells Fargo Bank, N.A. v. Liburd, 176 A.D.3d 464, 464, 107 N.Y.S.3d 858 [2019] ). The Second Department determined in Milone that this letter met the "clear and unambiguous" criteria for a valid de-acceleration notice and raised a genuine issue of fact as to whether the lender's de-acceleration notice was timely ( Milone v. U.S. Bank N.A., 164 A.D.3d at 153–154, 83 N.Y.S.3d 524 ).

Here, by comparison, the voluntary discontinuance of the first two actions, without more, did not constitute an affirmative revocation of the initial acceleration of the debt (see Specialized Loan Servicing Inc. v. Nimec, 183 A.D.3d 962, 963, 123 N.E.3d 713, 2020 N.Y. Slip Op. 02688, *1 [2020 ]; Ditech Fin., LLC v. Naidu, 175 A.D.3d 1387, 1389–1390, 109 N.Y.S.3d 196 [2019], lv granted 34 N.Y.3d 910, 2020 WL 769004 [2020] ; HSBC Bank, N.A. v. Vaswani, 174 A.D.3d 514, 515, 101 N.Y.S.3d 852 [2019] ; Bank of N.Y. Mellon v. Craig, 169 A.D.3d at 627, 93 N.Y.S.3d 425 ; Freedom Mtge. Corp. v. Engel, 163 A.D.3d at 632–633, 81 N.Y.S.3d 156 ). That is particularly so because plaintiff's predecessors in interest moved to discontinue each action due to title concerns, without addressing the prospect of revoking the acceleration and resuming installment payments (see Ditech Fin., LLC v. Naidu, 175 A.D.3d at 1389, 109 N.Y.S.3d 196 ). We recognize that, by letter dated November 15, 2012, Nationstar, identifying itself as "[s]ervicer of the ... loan, on behalf of Nationstar ..., as [c]reditor to whom the debt is owed," informed Tufano that she was in default in the amount of $62,042, warned that the balance would continue to accrue and advised that she could cure the default with a direct payment of the arrearage and the next installment due December 1, 2012. No mention was made of the pending action, and it is worth noting that the mortgage was not assigned to Nationstar until January 2013. The motion to discontinue was not made until June 2013 and was predicated on a title flaw, not the November 2012 letter. The same approach was followed in Nationstar's August 13, 2015 letter, which informed Tufano of her right to cure her default with a direct $121,486 payment. Once again, the letter made no mention of the then pending second action. To the contrary, the letter cautioned that, absent timely payment, Nationstar "may acquire the property by means of foreclosure and sale" as if it had not already embarked on that course through the pending action. Four months later, plaintiff moved to discontinue the second action due to title issues. In a supporting affirmation, plaintiff's counsel represented that plaintiff had previously sought to discontinue the action by stipulation, but did not elaborate as to the basis for the stipulation or refer to the August 2015 letter. This sequence does not establish a de-acceleration of the loan. The default letters and motions to discontinue were too attenuated to be considered joint proposals, and no affirmative representation was ever made that the lender was de-accelerating the loan. By comparison, the lender's letter in Milone affirmatively de-accelerated the loan ( Milone v. U.S. Bank N. A., 164 A.D.3d at 149, 83 N.Y.S.3d 524 ).

After the second action was discontinued, plaintiff's representative sent two letters to Tufano. The first letter, dated November 3, 2016, provided the 90–day notice required under RPAPL 1304 and demanded payment of $87,009.49 by November 30, 2016 to cure the default. The second letter, dated January 5, 2017 and captioned "Notice of Intent to Foreclose," advised that Tufano had 30 days to cure a default dating back to May 1, 2011 in the amount of $89,518.61. These letters do not indicate a clear and unambiguous return to an installment payment plan and, for all practical purposes, do not actually evidence any real intent to de-accelerate the loan. In effect, "plaintiff simply put defendant[s] on notice of its obligation to cure a ... default and then promptly embarked on the notices required to initiate a [third] foreclosure action" ( Wells Fargo Bank, N.A. v. Portu, 179 A.D.3d 1204, 1207, 116 N.Y.S.3d 761 [2020] ). In our view, these notices do not constitute affirmative actions to de-accelerate the mortgage (see id. ; compare Fed. Natl. Mtge. Assn. v. Rosenberg, 180 A.D.3d 401, 402–403, 119 N.Y.S.3d 441 [2020] ). It follows that Supreme Court erred in denying defendants' motion for summary judgment dismissing the action as time-barred. As such, plaintiff's motion for a judgment of foreclosure and sale should not have been granted.

Clark and Reynolds Fitzgerald, JJ., concur.

Pritzker, J. (dissenting).

We respectfully dissent because we find that the debt was, as a matter of law, de-accelerated within the applicable...