The Appellate Division, Third Department, Holds that the Six-Year Statute of Limitations to Commence an Action to Foreclose a Reverse Mortgage Accrues at the Time of Death of the Borrower
Print Article- Posted on: Oct 28 2024
Today’s BLOG article relates to Reverse Mortgage Solutions, Inc. v. Miglucci, a mortgage foreclosure action[1] decided by the Appellate Division, Third Department, on October 17, 2024. The Court in Miglucci determined that the accrual date of a cause of action for the foreclosure of a reverse mortgage generally accrues upon the death of the borrower.[2]
In 2008, the Miglucci borrower borrowed money from the lender and secured her repayment obligations with a reverse mortgage on real property. “The terms of the mortgage provided, as relevant here, that the ‘lender may require immediate payment in full of all outstanding principal and accrued interest if a borrower dies and the property is not the principal residence of at least one surviving borrower.’” (Internal ellipses and brackets omitted.) The borrower died in 2010, and the property passed to her children. An action was commenced by the lender in 2016 to collect the unpaid balance due. The defendants defaulted and the lender moved for a default judgment and an order of reference. The defendants’ subsequent motion for leave to file a late answer was granted and the lender’s motion for a default judgment was denied. In their answer, the defendants asserted, inter alia, a statute of limitations defense. The lender then moved for summary judgment (and for reargument of its default judgment motion) and the defendants cross-moved for summary judgment and to quiet title pursuant to RPAPL § 1501(4)[3]. Determining that the lender’s action was barred by the six-year statute of limitations, the motion court granted the defendants’ cross-motion and denied the lender’s motions.
On the lender’s appeal, the Third Department affirmed. The Court concluded that the date of the borrower’s death in 2010, was the accrual date of the lender’s claim. Thus, the Court noted that “as we have previously held, a cause of action seeking a payment of money pursuant to a contract accrues “when the party making the claim possesses a legal right to demand payment, not when it actually made the demand”. (Citations, internal quotation marks and ellipses and brackets omitted.)[4] Since the borrower’s death occurred in February of 2010 and the foreclosure action was commenced in November of 2016, the action was time-barred.
The lender argued, unsuccessfully, that, based on the “permissive” language in the mortgage that the lender “may” accelerate if the borrower dies, the statute of limitations did not begin to run until the action was commenced. This argument was flatly rejected by the Third Department. The Court also rejected the “policy considerations” raised by the lender to support its argument, concluding that such considerations “do not outweigh the fact that the reading of the parties’ agreement advanced by plaintiff would permit the indefinite extension of the statute of limitations subject only to plaintiff’s discretion.” (Citations omitted.) The Court further noted that “it has long been the public policy of this State to forbid parties from agreeing to extend the limitations period prior to accrual.” (Citations omitted.) The Court also rejected the lender’s argument that “periodically checking with its borrowers in order to determine whether said conditions have occurred would impose an excessive hardship.” Among other things, the Court found the “policy arguments” rang “hollow” when one considers its specialization in providing the type of mortgage at issue, the clientele that the product is marketed to, and the fact that the relevant grounds for acceleration of the remaining balance owed on the reverse mortgage were limited to the death of the borrower and the sale or transfer of the property.” (Citation and footnote omitted.)
Finally, the Court, in rejecting the lender’s argument that “it is not subject to the statute of limitations as it shares ‘the same interests and goals’ as HUD,” stated:
Even accepting that statement as true, it is an insufficient premise to bestow the protection of immunity from the statute of limitations, as the record is otherwise devoid of any proof establishing that plaintiff is the assignee of HUD or that HUD had the right to foreclose on the mortgage. Plaintiff therefore failed to demonstrate the applicability of an exception to the statute of limitations.
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.
[1] Eds. Note: this BLOG has written numerous articles addressing all aspects of residential mortgage foreclosure. To find BLOG articles related to foreclosure, visit the “BLOG” tile on our website and enter “foreclosure” (or any related topic of interest) in the “search” box.
[2] Eds. Note: this BLOG has written numerous articles addressing statutes of limitation issues in foreclosure actions. To find BLOG articles related to this issue, visit the “BLOG” tile on our website and enter “statute of limitations” in the “search” box.
[3] Eds. Note: this BLOG has written numerous articles addressing actions to quiet title pursuant to RPAPL § 1501(4). To find BLOG articles related to this issue, visit the “BLOG” tile on our website and enter “1501(4)” in the “search” box.
[4] This holding is consistent with the body of case law holding that the statute of limitations on a promissory note payable on demand begins to run at the time of its execution because that is when the right to demand payment accrues. See, e.g., Elia v. Perla, 150 A.D.3d 962, 964-65 (2nd Dep’t 2017); Avon Development Enterprises Corp. v. Samnick, 286 A.d.2d 581, 582 (1st Dep’t 2001).
