Wells Fargo Bank, National Association v. Khorram
Attorneys and Parties
Brief Summary
Mortgage foreclosure statute of limitations and the retroactive effect of the Foreclosure Abuse Prevention Act (FAPA) on acceleration/de-acceleration practices.
The trial court denied Khorram’s cross-motion, holding the action was not time-barred because the bank’s voluntary discontinuance of a 2007 foreclosure de-accelerated the debt under Freedom Mtge. Corp. v Engel, and later denied leave to renew after FAPA’s enactment.
The order denying leave to renew and the prior denial of the borrower’s cross-motion; the complaint against Khorram is dismissed as time-barred, and she is awarded attorneys’ fees under Real Property Law § 282.
Under CPLR 213(4) [six-year statute of limitations for mortgage foreclosure actions], the 2007 foreclosure accelerated the debt and started the limitations period. FAPA (Foreclosure Abuse Prevention Act) [L 2022, ch 821; remedial statute enacted to thwart and eliminate abusive and unlawful litigation tactics; nullifies Engel’s de-acceleration-by-discontinuance rule] amended CPLR 3217(e) [voluntary discontinuance in mortgage instrument actions does not affect the limitations period unless expressly prescribed by statute], so the 2009 discontinuance did not reset or revoke acceleration. The 2015 action was thus untimely. Retroactive application of FAPA is proper and constitutional, and the bank’s Due Process and Contract Clause arguments fail. As the prevailing party, Khorram is entitled to fees under Real Property Law § 282 [allows a prevailing mortgagor to recover reasonable attorneys’ fees and expenses where the mortgage allows fees to the lender].
Background
Khorram executed a note and mortgage in February 2007. After an alleged default, Wells Fargo filed a foreclosure action in 2007, thereby accelerating the debt. The bank voluntarily discontinued that action in 2009. It filed a new foreclosure in 2015 on the same mortgage. Relying on Freedom Mtge. Corp. v Engel, the bank argued its 2009 discontinuance revoked acceleration, making the 2015 case timely. After the Legislature enacted the Foreclosure Abuse Prevention Act (FAPA) effective December 30, 2022, which added CPLR 3217(e) and was intended to curb abusive litigation tactics, Khorram sought renewal to argue the 2015 suit was time-barred.
Lower Court Decision
In June 2021, the Supreme Court, Suffolk County, denied Khorram’s cross-motion for summary judgment and attorneys’ fees, reasoning the case was timely under Engel because the 2009 discontinuance revoked acceleration. In September 2023, the court denied Khorram’s motion for leave to renew based on FAPA, after the bank argued FAPA should not apply retroactively and would violate Due Process.
Appellate Division Reversal
The Appellate Division reversed, granted leave to renew, vacated the 2021 denial, and granted summary judgment dismissing the complaint as time-barred under CPLR 213(4). Applying FAPA and CPLR 3217(e), the court held the 2009 discontinuance did not de-accelerate or reset the statute of limitations. It further held FAPA applies retroactively, serves a rational legislative purpose, and does not violate Due Process. Addressing a pure question of law, the court rejected the bank’s Contract Clause argument because the bank identified no contractual right to revoke acceleration. The court awarded Khorram prevailing-party attorneys’ fees under Real Property Law § 282 and remitted for a fee hearing.
Legal Significance
Confirms FAPA’s retroactive application to pending foreclosure matters without an enforced final judgment, nullifying Engel’s rule that voluntary discontinuance de-accelerates mortgage debt. Reinforces that acceleration upon filing starts the six-year limitations period under CPLR 213(4), and a voluntary discontinuance does not toll, reset, or revive the period under CPLR 3217(e). Affirms the constitutionality of FAPA’s retroactive application against Due Process and Contract Clause challenges. Clarifies that a prevailing mortgagor may recover attorneys’ fees under Real Property Law § 282.
Once a mortgage debt is accelerated by commencing foreclosure, the six-year clock under CPLR 213(4) runs on the entire debt; after FAPA, a voluntary discontinuance does not undo acceleration or reset the statute of limitations, and borrowers who prevail on limitations defenses may recover attorneys’ fees under Real Property Law § 282.