Wells Fargo Bank, National Association v 685 Georgia, LLC
Categories
Attorneys and Parties
Brief Summary
Mortgage foreclosure and statute of limitations. The issue was whether a foreclosure action filed in 2017 was timely after the mortgage debt had been accelerated in a 2009 foreclosure action, and whether a 2015 loan modification agreement could reset or extend the limitations period under Civil Practice Law and Rules (CPLR) 213(4) [six-year statute of limitations for a mortgage foreclosure action].
The Supreme Court, Kings County, held that the 2015 loan modification agreement was effective to extend the statute of limitations, granted the plaintiff summary judgment against 685 Georgia, LLC, granted an order of reference, and appointed a referee to compute.
The Appellate Division reversed both June 7, 2022 orders insofar as appealed from, denied the plaintiff's request for summary judgment and an order of reference, and granted 685 Georgia, LLC summary judgment dismissing the complaint as time-barred.
The 2009 foreclosure action accelerated the entire mortgage debt, starting the six-year limitations period. Because this action was not commenced until January 2017, it was untimely. The 2015 loan modification agreement did not revive the claim because the borrower had already conveyed away his ownership interest and no longer had rights in the property that could reset or extend the statute of limitations. The property owner, 685 Georgia, LLC, also had standing to challenge that agreement.
Background
The borrower, Rotimi Erobobo, executed a note secured by a mortgage on Brooklyn property. In December 2009, Wells Fargo Bank, National Association commenced a foreclosure action and elected to call due the entire mortgage debt, thereby accelerating the loan. That 2009 action was later discontinued. In April 2013, the borrower conveyed the property to Georgia Estates, Inc. In October 2015, after he had already transferred the property, the borrower entered into a loan modification agreement with the plaintiff. In December 2015, Georgia Estates, Inc. conveyed the property to 685 Georgia, LLC. In January 2017, the plaintiff commenced this foreclosure action against 685 Georgia, LLC and others. 685 Georgia, LLC asserted, among other defenses, that the action was barred by the statute of limitations.
Lower Court Decision
The Supreme Court concluded that the 2015 loan modification agreement extended the limitations period and therefore the 2017 foreclosure action was timely. Based on that view, it granted the plaintiff summary judgment on the complaint insofar as asserted against 685 Georgia, LLC, granted an order of reference, denied the defendant's cross-motion for summary judgment dismissing the complaint as untimely, and in a second order appointed a referee to compute the amount due.
Appellate Division Reversal
The Appellate Division held that 685 Georgia, LLC made a prima facie showing that the action was untimely because the mortgage debt had been accelerated in December 2009 and the present action was not commenced until more than six years later. The plaintiff failed to raise a triable issue of fact in response. The court rejected the plaintiff's argument that the 2015 loan modification reset or extended the limitations period, holding that the borrower had already conveyed away the property and his rights had been extinguished before signing that agreement. The court also held that 685 Georgia, LLC, as owner of the property, had standing to challenge the modification agreement. It therefore dismissed the foreclosure complaint insofar as asserted against 685 Georgia, LLC.
Legal Significance
This decision reinforces that when a lender accelerates a mortgage debt by filing a foreclosure complaint that demands the entire amount due, the six-year limitations period under Civil Practice Law and Rules (CPLR) 213(4) [six-year statute of limitations for a mortgage foreclosure action] begins to run on the full debt. It also clarifies that a later loan modification signed by a borrower who no longer owns the mortgaged property cannot revive or extend that period under these circumstances. In addition, a current property owner may challenge such a modification when it is used to defeat a statute of limitations defense.
A lender cannot avoid a time bar on a previously accelerated mortgage by relying on a later modification agreement executed by a former owner whose property rights had already ended.