Background
Bank of New York Mellon commenced a foreclosure action in December 2011 and elected in its complaint to accelerate the entire mortgage debt. It voluntarily discontinued that case in 2014. In May 2018, the bank filed a new foreclosure action against the property and, among others, 35 Pleasure, LLC. The limited-liability company sought dismissal and cancellation of the mortgage under RPAPL 1501(4), arguing that the six-year limitations period had run from the 2011 acceleration.
Supreme Court initially rejected that defense, and a prior appeal left the foreclosure moving forward. The Legislature then enacted the Foreclosure Abuse Prevention Act, commonly called FAPA. The statute changed the rules governing acceleration and de-acceleration in mortgage cases, providing that once a foreclosure claim accrues, a party may not unilaterally revive, reset, or extend the limitations period. Relying on that change in law, 35 Pleasure sought renewal of its earlier motion. Supreme Court denied renewal, confirmed the referee’s report, and entered a judgment of foreclosure and sale.
The Court’s Holding
The Second Department reversed and granted renewal. FAPA was a change in law that would alter the prior determination, which is a recognized ground for renewal under CPLR 2221(e). The 2011 complaint accelerated the debt and started the six-year clock. Under FAPA, the bank’s later voluntary discontinuance did not de-accelerate the mortgage, revive the claim, or reset accrual. The limitations period therefore expired in December 2017, about five months before the bank filed the present action.
The panel granted 35 Pleasure summary judgment dismissing the foreclosure claim against it and on its RPAPL 1501(4) counterclaim to cancel and discharge the mortgage of record. It also rejected the bank’s constitutional and retroactivity objections, citing the Court of Appeals’ treatment of FAPA. Because the statutory change governed the effect of the prior discontinuance, the bank could not rely on pre-FAPA doctrine to treat the 2018 complaint as timely.
Key Takeaways
- A lender’s voluntary discontinuance no longer unilaterally de-accelerates a mortgage debt or restarts the limitations period after FAPA.
- A change in foreclosure law can support renewal under CPLR 2221(e) when it would alter the court’s earlier limitations ruling.
- Owners and lienholders may use RPAPL 1501(4) to obtain cancellation of a mortgage after the limitations period for foreclosure has expired.
Why It Matters
The ruling is consequential for New York lenders, servicers, investors, title insurers, and property owners because it applies FAPA to a familiar foreclosure sequence: acceleration, voluntary discontinuance, and a later action. File reviews must begin with the earliest complaint or unequivocal acceleration and should not assume that discontinuance restored installment treatment. If six years elapsed before the operative action, the lien itself may be vulnerable to cancellation.
For lenders, the decision underscores the need for limitations tracking across transfers, servicing changes, and discontinued cases. For owners and real-estate counsel, it confirms that renewal may be available when FAPA changes the legal effect of an earlier procedural event. Title and transaction diligence should identify every prior foreclosure, its acceleration language, disposition, and the dates on which later enforcement began.
The remedy extends beyond dismissal of one lawsuit. RPAPL 1501(4) can clear an expired mortgage from the public record, affecting priority, sale, refinancing, and valuation. Parties evaluating distressed debt therefore need a complete litigation chronology before acquisition, not merely the current payment history. They should also account for stays, tolls, bankruptcy events, and any judicial determinations that may affect the calculation, while recognizing that a lender’s unilateral paperwork cannot accomplish the reset FAPA forbids.
Practitioners should distinguish acceleration from other default activity. The operative pleading, notices, loan documents, and prior orders may determine when the entire debt became due. Once that date is fixed, a later discontinuance cannot simply be treated as a clean slate under FAPA. A limitations analysis should be completed before commencing another foreclosure or purchasing the note. Where expiration appears likely, both sides should evaluate the separate proof needed for a quiet-title counterclaim and the effect of cancellation on other recorded interests.