Confirmed Chapter 13 “Surrender/Release” Judicially Estops FAPA and Other Nonjurisdictional Foreclosure Defenses; Referee’s Amount-Due Findings Must Be Supported by Produced Business Records

Introduction

This commentary analyzes the Appellate Division, Second Department’s decision in Citimortgage, Inc. v. Erickson (2025 NY Slip Op 04156), a mortgage foreclosure appeal that sits at the intersection of bankruptcy law, New York foreclosure procedure, and the recently enacted Foreclosure Abuse Prevention Act (FAPA). The case addresses two distinct but highly consequential issues:

• Whether a borrower who “surrendered” (or, as phrased here, “released”) the mortgaged property in a confirmed Chapter 13 plan is judicially estopped from asserting nonjurisdictional defenses—specifically including a statute-of-limitations defense premised on FAPA—in a subsequent New York foreclosure action.
• Whether a referee’s computation of the amount due can be confirmed where it rests on unproduced business records.

The decision affirms, in significant part, the trial court’s use of judicial estoppel to bar the borrower’s defenses notwithstanding FAPA, while simultaneously reinforcing evidentiary rigor on the amount due by rejecting a referee’s report that relied on unproduced business records. The ruling thus offers a potent reminder that while estoppel may truncate merits defenses, lenders still must carry their proof burden at the computation stage.

Summary of the Judgment

The Second Department:

• Affirmed the trial court’s denial of the borrower’s motion for leave to renew based on FAPA. The panel held that the borrower was judicially estopped from asserting nonjurisdictional defenses because his confirmed Chapter 13 plan “released” the property to the lender for liquidation—functionally equivalent to “surrender” under 11 USC § 1325(a)(5)(C) and binding under § 1327(a). Judicial estoppel was unaffected by FAPA’s changes and therefore rendered renewal futile.
• Modified the order by denying the lender’s motion to confirm the referee’s report and for a judgment of foreclosure and sale, rejecting the report, and remitting for a new computation. The court found the referee’s damages findings were not substantially supported because they relied on unproduced business records.

Bottom line: the foreclosure may proceed, but on remand the lender must properly prove the amount due with admissible, produced business records.

Analysis

Precedents Cited and Their Role

• CPLR 2221(e)(2); Opalinski v City of New York, 205 AD3d 917; Dinallo v DAL Elec., 60 AD3d 620; U.S. Bank N.A. v Valencia, 219 AD3d 890
  These authorities establish that a motion to renew is appropriate to raise a change in the law, but renewal requires showing the change would alter the prior determination. The court held FAPA did not change the outcome because judicial estoppel—independent of the statute-of-limitations landscape—barred the defense.
• Judicial Estoppel Line: Ghatani v AGH Realty, LLC, 181 AD3d 909; Cussick v R.L. Baxter Bldg. Corp., 228 AD3d 614; Cruz v Bank of N.Y. Mellon, 218 AD3d 638; Davis v Citibank, N.A., 116 AD3d 819
  These cases articulate the doctrine that a party who prevails on a position in one proceeding cannot later take a contrary position in another, to protect the integrity of the judicial process and avoid inconsistent outcomes. The court applied this doctrine to bar the borrower’s defenses after he obtained confirmation of a bankruptcy plan “releasing” the property.
• Bankruptcy Surrender Authorities: 11 USC § 1325(a)(5)(C); 11 USC § 1327(a); In re Failla, 838 F3d 1170 (11th Cir.); In re Scott, 567 BR 847 (SD Fla)
  These authorities collectively establish that once a Chapter 13 plan is confirmed requiring surrender, the debtor is bound and must not oppose foreclosure in subsequent proceedings. The Second Department embraced Failla’s practical gloss—that surrender requires dropping opposition to foreclosure—and treated “release” in the plan as synonymous with “surrender,” citing Black’s Law Dictionary.
• Koch v National Basketball Assn., 245 AD2d 230; Bank of N.Y. Mellon v Kantrow, 57 Misc 3d 1204(A) (Sup Ct, Suffolk Cty)
  These New York authorities further support applying judicial estoppel in varying contexts, including mortgage foreclosure, once a party has taken and benefitted from a contrary position in a prior proceeding.
• First Department Distinctions: Wilmington Trust, N.A. v Farkas, 232 AD3d 524; Bank of N.Y. Mellon v Del Rio, 233 AD3d 529
  The borrower relied on these cases, but the Second Department distinguished them: they involved mere “checkbox” intentions to surrender without a confirmed bankruptcy order requiring surrender to the mortgagee. Here, confirmation made the difference.
• Referee/Proof Standard: Wilmington Sav. Fund Socy., FSB v Diehl, 219 AD3d 781; Citimortgage, Inc. v Kidd, 148 AD3d 767
  These cases hold that a referee’s computation must be substantially supported by the record, and an amount-due calculation premised on unproduced business records is insufficient. The Second Department relied on these to reject the referee’s report and deny confirmation/JFS.

Legal Reasoning

The decision rests on two principal legal pillars: (1) judicial estoppel flowing from the confirmed Chapter 13 plan, and (2) evidentiary requirements for confirming a referee’s report.

First, the court mapped the federal bankruptcy provisions onto New York foreclosure procedure:

• Under 11 USC § 1325(a)(5)(C), a Chapter 13 plan may be confirmed where the debtor “surrenders” the collateral to the creditor.
• Under 11 USC § 1327(a), the confirmed plan “bind[s] the debtor and each creditor.”
• Persuasive federal authority (Failla) interprets “surrender” to mean that the debtor must cease opposing foreclosure; and trial-level guidance (Scott) condemns the practice of surrendering in bankruptcy yet fighting foreclosure afterward as abusive.
• Because the confirmed plan here “released” the premises to the plaintiff for liquidation, the court treated “release” as synonymous with “surrender,” reinforced by dictionary definition and context.

Applying New York’s judicial estoppel doctrine, the court held that the borrower’s position in bankruptcy—securing the benefit of confirmation by releasing/surrendering the property—foreclosed him from adopting an inconsistent position later by raising nonjurisdictional defenses in the foreclosure. The estoppel serves both to preserve the integrity of the judicial process and prevent inconsistent outcomes between the bankruptcy court’s confirmation and the state court foreclosure proceeding.

Second, the court addressed the lender’s proof at the computation stage. Although the borrower’s defenses were barred, the amount due still had to be proved with competent evidence. The referee’s report was premised on business records that were not produced; this runs afoul of New York’s established requirement that damages calculations be “substantially supported by the record.” It is not enough to rely on hearsay summaries or conclusory affidavits referencing records; the records themselves (or properly admitted business records through a qualified witness) must be before the court.

Finally, on the motion to renew, the court held that while a change in law (FAPA) is a proper basis for renewal, the movant must show the change would alter the prior outcome. Here, estoppel—not the pre-FAPA statute-of-limitations regime—was dispositive. Because judicial estoppel was unaffected by the statutory change, FAPA could not change the result, and renewal was properly denied.

Impact

Immediate Effects

• Judicial Estoppel after Chapter 13 surrender/release: In the Second Department, once a debtor’s confirmed Chapter 13 plan requires surrender or release of the mortgaged premises to the lender, the borrower is judicially estopped from pressing nonjurisdictional defenses in a later foreclosure action. This expressly encompasses a FAPA-based statute-of-limitations defense.
• Proof of Amount Due: Even where defenses are curtailed by estoppel, lenders must still prove the debt with admissible, produced business records. Referee reports lacking such foundation will be rejected.

Broader Doctrinal Significance

• Bankruptcy-Foreclosure Interface: The decision embraces Failla’s practical construction of “surrender” and strengthens the binding effect of confirmed plans under § 1327(a) within New York foreclosure litigation. It discourages strategic inconsistency—promising surrender to obtain confirmation while later resisting foreclosure.
• FAPA’s Limits: FAPA does not revive defenses when an independent doctrine—here, judicial estoppel—bars them. This curtails the use of FAPA to reopen or relitigate foreclosures where a confirmed bankruptcy plan committed the debtor to surrender/release the property.
• Interdepartmental Harmony: The court distinguished First Department cases involving mere stated intent to surrender (checkboxes) without confirmation. This avoids direct conflict and signals that confirmation is the key threshold for estoppel based on bankruptcy surrender.

Practical Takeaways for Practitioners

• For Lenders:
  • Attach the confirmed Chapter 13 plan and confirmation order to summary judgment motions; explicitly argue judicial estoppel to bar nonjurisdictional defenses (e.g., statute of limitations, standing, conditions precedent).
  • At the computation stage, submit the actual business records (payment histories, notices, default calculations) with a proper CPLR 4518(a) foundation; do not rely on unproduced records or conclusory affidavits.
• For Borrowers:
  • Be mindful that confirming a Chapter 13 plan with a surrender/release provision will likely bar later foreclosure defenses in state court. If the intent is to cure/maintain or otherwise contest enforcement, the plan should reflect that strategy before confirmation.
  • Jurisdictional objections (e.g., lack of personal jurisdiction due to improper service) are generally not “nonjurisdictional” and may remain available; but typical foreclosure defenses (e.g., statute of limitations, standing, RPAPL 1304 compliance) risk being estopped.
• For Referees and Courts:
  • Ensure the record includes produced business records underpinning the amount due; absent that, deny confirmation and remit for a new computation.

Complex Concepts Simplified

• Judicial Estoppel: A fairness rule that prevents a party from winning in one court by saying “A” and then switching to “not A” in another case. If you persuaded a court to accept your earlier position, you can’t reverse course just because it’s now convenient.
• Chapter 13 “Surrender”/“Release” of Property: In a Chapter 13 plan, a debtor can choose to give up the collateral to the secured creditor. Once the plan is confirmed, the debtor is bound and, per Failla, should not oppose the creditor’s foreclosure efforts in state court. “Release” language is treated the same as “surrender” in this context.
• FAPA (Foreclosure Abuse Prevention Act): A 2022 New York statute aimed at curbing perceived abuses around statute-of-limitations maneuvers in mortgage cases. Among other things, it restricts lenders’ ability to “reset” the limitations period through de-acceleration and constrains recommencement after dismissals. FAPA applies broadly, including to pending cases, but it does not override judicial estoppel.
• Motion to Renew (CPLR 2221[e]): A motion asking the court to revisit an order due to new facts or a change in law. To succeed based on a legal change, the movant must show the change would alter the outcome. If an independent doctrine (like estoppel) would control anyway, renewal will be denied.
• Order of Reference and Referee’s Report: In foreclosure actions, after liability is established, the court may appoint a referee to compute the amount due. The referee’s report is then submitted for confirmation. The court will not confirm a report unless the computation is supported by admissible, produced business records, not just summaries or unproduced documents.
• Nonjurisdictional vs. Jurisdictional Defenses: Nonjurisdictional defenses go to the merits (e.g., statute of limitations, standing, notice compliance) and can be waived or estopped. Jurisdictional objections (e.g., lack of subject matter jurisdiction, lack of personal jurisdiction due to improper service) are different; judicial estoppel in this setting addresses nonjurisdictional defenses.

Conclusion

Citimortgage, Inc. v. Erickson delivers two clear messages. First, when a borrower’s confirmed Chapter 13 plan surrenders (or “releases”) the mortgaged property to the lender for liquidation, judicial estoppel will generally bar the borrower from later asserting nonjurisdictional defenses in a New York foreclosure action—including a FAPA-based statute-of-limitations defense. The decision aligns New York foreclosure practice with persuasive federal bankruptcy precedent, reinforcing the binding effect of confirmed plans under § 1327(a) and the integrity of the judicial process.

Second, even where estoppel constrains the merits, lenders must still prove the amount due with competent, produced business records. Referee reports premised on unproduced records will not be confirmed. The court’s dual rulings thus simultaneously streamline liability disputes post-surrender while insisting on rigorous evidentiary support for damages.

As foreclosure litigation continues to grapple with FAPA’s reach, Erickson demarcates an important boundary: FAPA cannot revive defenses that are independently foreclosed by the borrower’s own binding commitments in bankruptcy. At the same time, the decision reaffirms that foreclosure judgments rest not only on entitlement to relief but also on meticulous proof of the amount owed.