Second Department Cancels and Discharges of Record A Mortgage Pursuant to RPAPL 1501(4)
Print Article- Posted on: Apr 28 2023
As explained in our Blog entitled: “Get Rid of a Stale Mortgage By Bringing an Action Under RPAPL 1501(4),” mortgage on real property are typically delivered as security for the repayment of an obligation evidenced by a promissory note. A mortgage is an encumbrance on real property. Removing the encumbrance, if given the opportunity, makes sense.
In situations where a mortgage appears as a lien of record on real property, but the statute of limitations has expired for the mortgagee to commence an action to foreclose the mortgage, RPAPL 1501(4) permits the mortgagor (or any other “person having an estate or interest in the real property”) to commence an action to have the encumbrance removed of record. RPAPL 1501(4) provides:
Where the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage, or to enforce a vendor’s lien, has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action against any other person or persons, known or unknown, including one under disability as hereinafter specified, to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom; provided, however, that no such action shall be maintainable in any case where the mortgagee, holder of the vendor’s lien, or the successor of either of them shall be in possession of the affected real property at the time of the commencement of the action. In any action brought under this section it shall be immaterial whether the debt upon which the mortgage or lien was based has, or has not, been paid; and also whether the mortgage in question was, or was not, given to secure a part of the purchase price.
Thus, a mortgagor need not wait for the mortgagee to commence foreclosure proceedings, and defend by asserting a statute of limitations defense, to have the lien of the mortgage extinguished of record.
“[A]n action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein” is subject to a six-year statute of limitations. See CPLR 213(4). In mortgage foreclosure actions, the statute of limitations begins to run from each unpaid installment, from the time that the mortgagee is entitled to receive full payment or the time the debt is accelerated. See Bank of New York Mellon v. Celestin, 164 A.D.3d 733 (2nd Dep’t 2018). “The law is well settled that, even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt…[because]…once a mortgage debt is accelerated, the borrowers’ right and obligation to make monthly installments ceased and all sums become immediately due and payable, and the six-year Statute of Limitations begins to run on the entire mortgage debt.” EMC Mortgage Corp. v. Patella, 279 A.d.2d 604 (2nd Dep’t 2001) (citations, internal quotation marks and internal brackets omitted.) As the Court of Appeals noted, “acceleration is, therefore, a significant event for statute of limitations purposes….” Freedom Mortgage v. Engel, 37 N.Y.3d 1, 22 (2021). [Eds. Note: this Blog has discussed Engel [here] and [here] and general concepts of acceleration [here].] As a corollary, the concept of deacceleration became just as significant an issue because deacceleration would stop the statute of limitations clock running on the prior acceleration. In Engel, the Court in discussing deacceleration and in “[a]dopting a clear rule that will be easily understood by the parties and can be consistently applied by the courts, [held] that where the maturity of the debt has been validly accelerated by commencement of a foreclosure action, the noteholder’s voluntary withdrawal of that action revokes the election to accelerate, absent the noteholder’s contemporaneous statement to the contrary.” Engel, 37 N.Y.3d at 19.
The interplay between statute of limitations, acceleration and RPAPL 1501(4) was addressed by the Appellate Division, Second Department, on April 26, 2023, in Bush N Stuy v. Bayview Loan Servicing, LLC. Borrower in Bush N Stuy executed a mortgage in 2006. A foreclosure action was commenced in 2009 upon borrower’s default. [Eds. Note: the recited facts have been simplified for editorial purposes.] This action was abandoned upon borrower entering into a home affordable modification trial period plan agreement.
Lender commenced a second foreclosure action in 2012 in which lender moved for a default judgment and borrower cross-moved to dismiss the action as abandoned pursuant to CPLR 3215(c). [Eds. Note: this Blog has discussed CPLR 3215(c) [here], [here], [here] and [here].] Borrower’s cross-motion was granted.
In 2016, borrower commenced an action pursuant to RPAPL 1501(4) to cancel and discharge the mortgage of record and subsequently moved for summary judgment. Lender cross-moved for summary judgment. Borrower’s motion was granted, lender’s cross-motion was denied and the mortgage was cancelled and discharged of record. Lender appealed.
The Second Department affirmed. The Court explained the relevant law as follows:
Pursuant to RPAPL 1501(4), a person having an estate or interest in real property subject to a mortgage may maintain an action to secure the cancellation and discharge of the encumbrance, and to adjudge the estate or interest free of it, if the applicable statute of limitations for commencing a foreclosure action has expired (see Ditmid Holdings, LLC v JPMorgan Chase Bank, N.A., 180 AD3d 1002, 1003). An action to foreclose a mortgage is subject to a six-year statute of limitations (see CPLR 213[4]). “‘[E]ven if the mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt'” (Bank of N.Y. Mellon Corp. v Alvarado, 189 AD3d 1149, 1150, quoting Deutsche Bank Natl. Trust Co. v Adrian, 157 AD3d 934, 935 [internal quotation marks omitted]). “It is well-settled that the filing of a verified foreclosure complaint may evince an election to accelerate” (Freedom Mtge. Corp. v Engel, 37 NY3d 1, 25). Lenders may revoke the acceleration of full mortgage loan balances, so long as the revocation is accomplished by an affirmative act occurring within six years of the earlier acceleration (see Deutsche Bank Natl. Trust Co. v Adrian, 157 AD3d at 935; MSMJ Realty, LLC v DLJ Mtge. Capital, Inc., 157 AD3d 885, 887).
The Court found that borrower met the burden of demonstrating entitlement to relief under RPAPL 1501(4) and stated:
Here, in support of its motion for summary judgment on the complaint, [borrower] established that the filing of the complaint in the 2009 action in December 2009 accelerated the mortgage debt so as to start the running of the six-year statute of limitations period, and that the commencement of a new action to foreclose the mortgage would be time-barred (see Persaud v U.S. Bank N.A., 197 AD3d 1120, 1122; 128 Skillman St. 4A, LLC v Nationstar Mtge., LLC, 193 AD3d 1025, 1027). In opposition, [lender] failed to raise a triable issue of fact as to whether the acceleration of the debt was revoked.
Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.
This article is for informational purposes and is not intended to be and should not be taken as legal advice.
