Hallie S. Maggi, et al. v U.S. Bank Trust, N.A.
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Attorneys and Parties
Brief Summary
Residential mortgage foreclosure and whether a mortgage could be canceled under RPAPL 1501(4) [permits a person with an interest in the property to seek cancellation and discharge of record of a mortgage when the foreclosure statute of limitations has expired] after the six-year foreclosure limitations period ran.
The Supreme Court, Suffolk County, denied the plaintiffs' motion for summary judgment on their complaint seeking to cancel and discharge the mortgage.
The Appellate Division reversed the order denying summary judgment and granted the plaintiffs summary judgment on the complaint.
The mortgage debt was accelerated in May 2010 when the lender commenced the first foreclosure action and demanded the full balance, so the six-year statute of limitations under CPLR 213(4) [an action to foreclose a mortgage is subject to a six-year statute of limitations] expired before this 2019 action was commenced. Under the Foreclosure Abuse Prevention Act (FAPA) (L 2022, ch 821) [limits a lender's ability to waive, postpone, cancel, toll, extend, revive, or reset the limitations period through voluntary discontinuance or unilateral acts], the voluntary discontinuance of the first foreclosure action and later purported de-acceleration letters did not reset the limitations period, and the lender's constitutional objections to FAPA were rejected.
Background
Everhome Mortgage Company, the defendant's predecessor in interest, commenced a foreclosure action in May 2010 against the plaintiffs and others concerning a residential property in Hauppauge, thereby electing in the complaint to call due the entire mortgage debt. That first action was voluntarily discontinued. Everhome then began a second foreclosure action in August 2010, which was later directed dismissed in effect pursuant to CPLR 3216. In February 2019, the plaintiffs brought this action under RPAPL 1501(4) [permits a person with an interest in the property to seek cancellation and discharge of record of a mortgage when the foreclosure statute of limitations has expired], alleging that the limitations period for foreclosure had already expired.
Lower Court Decision
The Supreme Court denied the plaintiffs' March 2024 motion for summary judgment. The defendant had argued that the voluntary discontinuance of the first foreclosure action and purported de-acceleration notices sent by a loan servicer reset the statute of limitations, and further argued that applying FAPA retroactively would violate the Due Process, Contract, and Takings Clauses of the United States Constitution.
Appellate Division Reversal
The Appellate Division held that the plaintiffs made a prima facie showing that the debt was accelerated in May 2010 by the filing of the first foreclosure complaint seeking the full balance due. Because acceleration started the six-year clock, the foreclosure statute of limitations expired before the 2019 RPAPL 1501(4) action was filed. The court further held that, under CPLR 3217(e) [a voluntary discontinuance does not waive, postpone, cancel, toll, extend, revive, or reset the limitations period], the discontinuance of the first action did not affect the running of the statute, and that letters purporting to de-accelerate the loan likewise did not reset the limitations period. The court rejected the defendant's constitutional challenges to FAPA and granted the plaintiffs summary judgment canceling and discharging the mortgage.
Legal Significance
This decision reinforces that once a mortgage debt is accelerated by a foreclosure complaint demanding the full balance, the six-year limitations period runs from that acceleration date. It also confirms the strong retroactive effect of FAPA in New York mortgage litigation by preventing lenders from reviving time-barred foreclosure rights through voluntary discontinuances or unilateral de-acceleration notices, and by rejecting federal constitutional challenges to that framework.
A lender that accelerates a mortgage debt through a foreclosure complaint cannot later reset the statute of limitations by discontinuing the action or sending de-acceleration letters; if six years pass, the borrower may obtain cancellation of the mortgage under RPAPL 1501(4).