Deutsche Bank National Trust Company, as Trustee for Ameriquest Mortgage Securities Inc. Asset-Backed Pass-Through Certificates, Series 2005-R5 v. Peter F. Testa
Attorneys and Parties
Brief Summary
Whether a lender’s voluntary discontinuance can reset the statute of limitations for mortgage foreclosure after acceleration, in light of the Foreclosure Abuse Prevention Act (FAPA) and CPLR 3217(e) [under FAPA: voluntary discontinuance does not waive, postpone, cancel, toll, extend, revive, or reset the limitations period absent express statutory authorization].
The trial court denied the lender’s summary judgment motion and dismissed the foreclosure complaint with prejudice as time-barred under CPLR 213(4).
The appellate court modified to grant the borrower judgment on his RPAPL 1501(4) counterclaim to cancel and discharge the mortgage; otherwise, it affirmed.
The 2007 foreclosure filing accelerated the debt, starting the six-year limitations period under CPLR 213(4) [six-year statute of limitations for mortgage foreclosure actions]; the 2012 voluntary discontinuance did not reset the period under CPLR 3217(e); FAPA applies retroactively; constitutional challenges (due process, Contract Clause, Takings) failed. Given the time-bar, RPAPL 1501(4) [allows cancellation and discharge of mortgage where the foreclosure action is time-barred] relief was required.
Background
Plaintiff filed a foreclosure action on April 11, 2007, accelerating the mortgage debt. That action was later dismissed sua sponte for failure to prosecute; plaintiff then filed a voluntary discontinuance in 2012. Plaintiff commenced a new foreclosure action on November 16, 2018. Defendant asserted the action was time-barred because the six-year period under CPLR 213(4) [six-year statute of limitations for mortgage foreclosure actions] began with the 2007 acceleration. Plaintiff argued the voluntary discontinuance revoked acceleration under Freedom Mortgage Corp. v. Engel, but the Foreclosure Abuse Prevention Act (FAPA) and CPLR 3217(e) [under FAPA: voluntary discontinuance does not waive, postpone, cancel, toll, extend, revive, or reset the limitations period absent express statutory authorization] abrogated Engel’s rule. Defendant also counterclaimed under RPAPL 1501(4) [allows cancellation and discharge of mortgage where the foreclosure action is time-barred] to cancel and discharge the mortgage.
Lower Court Decision
Supreme Court, Chautauqua County, denied plaintiff’s motion for summary judgment and granted defendant Testa’s cross-motion dismissing the complaint with prejudice as barred by the statute of limitations, but it did not issue judgment on defendant’s RPAPL 1501(4) counterclaim.
Appellate Division Reversal
The Appellate Division held the 2007 complaint accelerated the debt, triggering the six-year period, which expired before the 2018 action. The 2012 voluntary discontinuance did not reset the limitations period under CPLR 3217(e). FAPA applies retroactively (L 2022, ch 821, § 10) to actions where no final foreclosure judgment has been enforced; due process, Contract Clause, and Takings Clause challenges were rejected. The court modified the order to remit for entry of judgment granting defendant’s RPAPL 1501(4) counterclaim canceling and discharging the mortgage; otherwise affirmed.
Legal Significance
Confirms in the Fourth Department that FAPA retroactively abrogates Engel’s voluntary-discontinuance revocation rule and prevents lenders from manipulating the limitations period after acceleration. Establishes that once time-barred, borrowers are entitled to cancellation and discharge of the mortgage under RPAPL 1501(4), and rejects constitutional attacks on FAPA’s retroactive application.
After a mortgage is accelerated by filing a foreclosure action, the six-year limitations period runs and cannot be reset by voluntary discontinuance under FAPA/CPLR 3217(e). If the period expires, courts must cancel and discharge the mortgage under RPAPL 1501(4).