Benjamin v. LaSalle Bank, N.A.
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Attorneys and Parties
Brief Summary
Mortgage foreclosure and title-clearing litigation, specifically whether a borrower may cancel a mortgage under Real Property Actions and Proceedings Law (RPAPL) 1501(4) [permits a person with an interest in mortgaged real property to seek cancellation and discharge of the mortgage when the foreclosure statute of limitations has expired] after a prior foreclosure action accelerated the debt and the lender later tried to rely on the six-month savings statute.
The Supreme Court, Queens County, dismissed the amended complaint against U.S. Bank as asserted by Chittra Benjamin under CPLR 3211(a)(7) [rule allowing dismissal for failure to state a cause of action], denied the plaintiffs' request for a default judgment against LaSalle Bank under CPLR 3215 [rule governing defaults and default judgments], granted LaSalle Bank's dismissal motion, and denied U.S. Bank's motion to dismiss the claims asserted by David Benjamin.
The Appellate Division reversed the dismissal of Chittra Benjamin's claim against U.S. Bank, reversed the denial of a default judgment against LaSalle Bank, and reversed the dismissal of the claims against LaSalle Bank. It affirmed the denial of U.S. Bank's motion to dismiss the claim asserted on behalf of David Benjamin.
The 2009 foreclosure complaint accelerated the mortgage debt, triggering the six-year limitations period under CPLR 213(4) [sets a six-year statute of limitations for mortgage foreclosure]. More than six years had passed before this RPAPL 1501(4) action was filed. U.S. Bank could not use the six-month savings provision because Foreclosure Abuse Prevention Act (FAPA) replaced CPLR 205(a) with CPLR 205-a [special six-month savings provision for actions on mortgage instruments], which bars use by an assignee unless it pleads and proves it is acting on behalf of the original plaintiff, and also bars use where the prior action was dismissed for neglect under CPLR 3215. The court also held FAPA applies retroactively and does not violate due process. LaSalle Bank was a proper party and the plaintiffs established entitlement to a default judgment.
Background
In 2007, David Benjamin signed a $594,000 note secured by a mortgage on residential property in South Ozone Park, and both David Benjamin and Chittra Benjamin executed the mortgage. The loan was assigned to LaSalle Bank in 2008. On January 8, 2009, LaSalle Bank commenced a foreclosure action and elected in the complaint to declare the full balance immediately due, thereby accelerating the debt. David Benjamin answered, but Chittra Benjamin did not. Although LaSalle initially obtained favorable relief, that was later vacated. In December 2015, the foreclosure action was dismissed in its entirety because Chittra Benjamin was a necessary party and the complaint against her had been dismissed as abandoned under CPLR 3215 [rule governing defaults and default judgments]. The Appellate Division affirmed that dismissal in 2018. The Benjamins then brought this action on October 3, 2018, under RPAPL 1501(4) to cancel and discharge the mortgage. U.S. Bank, as successor assignee, later argued that its new 2019 foreclosure action was preserved by the six-month savings statute.
Lower Court Decision
The Supreme Court, Queens County, held that U.S. Bank had stated a basis to dismiss the amended complaint as to Chittra Benjamin, but not as to David Benjamin. It further denied the plaintiffs' motion for leave to enter a default judgment against LaSalle Bank and granted LaSalle Bank's cross-motion to dismiss the amended complaint against it under CPLR 3211(a)(7) [rule allowing dismissal for failure to state a cause of action].
Appellate Division Reversal
The Appellate Division held that both Chittra Benjamin and David Benjamin had viable RPAPL 1501(4) claims because the mortgage debt was accelerated in 2009 and the limitations period had expired before this action was commenced. The court rejected U.S. Bank's reliance on CPLR 205-a [special six-month savings provision for actions on mortgage instruments], holding that U.S. Bank was not the original plaintiff in the 2009 foreclosure and failed to plead or prove that it was acting on behalf of the original plaintiff, as required for an assignee to invoke the statute. The court also held that, as to Chittra Benjamin, the prior dismissal under CPLR 3215 independently barred use of the savings statute. The court further ruled that LaSalle Bank was a proper party, that its claim of nonexistence was contradicted by the record, and that the plaintiffs had satisfied the requirements for a default judgment against LaSalle Bank. Accordingly, the order was reversed insofar as appealed from and affirmed insofar as cross-appealed from.
Legal Significance
This decision reinforces that Foreclosure Abuse Prevention Act (FAPA) applies retroactively in mortgage limitations disputes and narrows mortgage lenders' ability to revive otherwise time-barred foreclosure claims through the six-month savings statute. It emphasizes that an assignee cannot rely on CPLR 205-a unless it pleads and proves it is acting on behalf of the original foreclosure plaintiff, and that a prior dismissal for neglect under CPLR 3215 bars the savings statute altogether. The case also confirms that borrowers may use RPAPL 1501(4) to clear title once the foreclosure limitations period has expired.
When a foreclosure complaint accelerates a mortgage debt, the six-year clock starts running, and a later assignee lender cannot avoid expiration by invoking CPLR 205-a unless it strictly satisfies the statute. If the prior foreclosure was dismissed for neglect or the assignee was not the original plaintiff acting on that plaintiff's behalf, the mortgage may be canceled under RPAPL 1501(4).