Express Mortgage Terms Preclude Quasi-Contract Recovery & RPAPL 1501(4) Cancellation Rule

Express Mortgage Terms Preclude Quasi-Contract Recovery & RPAPL 1501(4) Cancellation Rule

Introduction

In Auquilla v. Villa (2025 NYSlipOp 02053), the Appellate Division, Second Department, addressed two interlocking questions:

  1. Whether owners of residential property may cancel a long-dormant mortgage under RPAPL 1501(4) when prior foreclosure attempts were dismissed and the statute of limitations has run; and
  2. Whether a mortgagee—having expressly secured its right to advance funds for taxes, insurance, inspection, and maintenance—can nonetheless recover those advances from nonsignatory owners under equitable or quasi-contractual theories (unjust enrichment, quantum meruit, equitable lien, equitable mortgage).

The principal parties were:

  • Owners: Miguel Auquilla and Hilda Guzman, tenants in common who acquired two-thirds of the Ossining residence in 2006;
  • Borrower: Gladys Villa, the original mortgagor who retained one-third interest;
  • Mortgagee: Deutsche Bank National Trust Company, assignee of the note and mortgage.

Summary of the Judgment

The Court held that:

  • Mortgage Cancellation (RPAPL 1501(4))
    The owners were entitled to summary judgment cancelling the mortgage as time-barred. The original 2010 foreclosure action, commenced and then dismissed for neglect to prosecute, accelerated the debt and triggered a six-year limitations period. A second foreclosure (2014) also failed. More than six years after acceleration, an RPAPL 1501(4) action to cancel the mortgage lay, provided the mortgagee was not in possession.
  • Mortgagee in Possession
    Deutsche Bank failed to raise evidence that it exercised “full possession” to toll limitations. Its payment of taxes and insurance, and exterior inspections confirming occupancy, did not equate to possession of rents, profits, or legal duties of an owner-in-possession.
  • Quasi-Contractual Claims
    The mortgage agreement expressly granted the mortgagee rights to pay charges (taxes, insurance, preservation) and to secure reimbursement from the property. That express contract precluded any recovery under unjust enrichment or quantum meruit against the owners, even if they did not personally execute the mortgage.
  • Equitable Mortgage & Lien
    Equity will not impose an equitable mortgage or lien where a valid legal mortgage exists and provides full remedy. Having neglected its foreclosure rights, the mortgagee could not invoke equity for a third recovery theory.

Analysis

Precedents Cited

The Court relied on and elaborated key precedents:

  • Acceleration & Limitations (CPLR 213[4]; Lubonty v. U.S. Bank, 159 AD3d 962): Commencement of foreclosure accelerates the entire debt, starting the six-year clock.
  • RPAPL 1501(4) Cancellation (see Kashipour v. Wilmington Savings, 144 AD3d 985): A non-possessing mortgagee cannot foreclose once the limitations period expires; a property interest holder may cancel the mortgage.
  • Mortgagee in Possession Doctrine (LaPlaca v. Schell, 68 AD3d 1478): Tolling occurs only where mortgagee takes full possession—receiving rents, profit, and assuming duties.
  • Quasi-Contract Preclusion (Clark-Fitzpatrick, Inc. v. Long Is. R.R., 70 NY2d 382): An express contract covering the dispute bars implied-in-law obligations.
  • Equitable Mortgage & Lien (Chase v. Peck, 21 NY 581; Payne v. Wilson, 74 NY 348): Equity will enforce failed legal mortgages or liens only where no adequate remedy at law exists.

Legal Reasoning

The Court’s reasoning unfolds in two parts:

  1. RPAPL 1501(4) Claim
    Because the 2010 foreclosure accelerated the debt and was dismissed, the six-year limitations expired before any valid foreclosure. RPAPL 1501(4) thus authorized cancellation. The mortgagee’s evidence—payments of taxes/insurance and inspection reports—failed to show “possession” that would toll limitations.
  2. Counterclaims & Equity
    The mortgage agreement (though executed by the borrower) bound the property and its owners to all terms—including the right to advance and secure preservation costs. Under New York law, that express contract precludes recovery under unjust enrichment or quantum meruit. Nor could equity grant a separate equitable mortgage or lien: a valid legal mortgage already secured those advances, and the mortgagee neglected its own foreclosure rights.

Impact

This decision clarifies and cements several principles:

  • Mortgage Cancellation Practice
    RPAPL 1501(4) remains an effective remedy for property owners to extinguish stale mortgages where prior foreclosures died, provided the mortgagee was not in possession.
  • Scope of “Mortgagee in Possession”
    Mere maintenance payments and exterior inspections do not equate to possession. Mortgagees must take substantive control—rents, profits, legal duties—to toll limitations.
  • Contractual Exclusivity
    An express mortgage that anticipates and secures preservation expenses precludes equitable and quasi-contract claims, even against nonsignatory owners. Mortgagees must enforce remedies within their contracts.
  • Equity’s Restraint
    Courts of equity will not fashion equitable mortgages or liens when the parties have provided a full legal remedy—and the mortgagee has failed to pursue it.

Complex Concepts Simplified

  • Acceleration: When a lender files to foreclose and demands full repayment, the entire loan becomes due immediately, triggering the statute of limitations.
  • RPAPL 1501(4): A statutory action allowing a non-possessing property owner to cancel a mortgage if no valid foreclosure is brought within six years of acceleration.
  • Mortgagee in Possession: A lender takes control of property—collecting rents or managing upkeep—to protect its security interest and toll the time to sue.
  • Quasi-Contract (Unjust Enrichment / Quantum Meruit): Legal theories implying an obligation to prevent one party from unfairly benefiting at another’s expense—but barred if a governing contract exists.
  • Equitable Mortgage & Lien: Equity can sometimes enforce a failed mortgage formalism, but only when no adequate contract remedy exists.

Conclusion

Auquilla v. Villa establishes a critical triad of rules:

  1. Property owners may extinguish mortgages via RPAPL 1501(4) when prior foreclosures lapse and no possession tolls limitations.
  2. Express mortgage terms covering preservation expenses foreclose any equitable or quasi-contractual recovery outside those terms.
  3. Courts of equity will not create new security interests where a valid mortgage provided sufficient remedy and was simply not enforced.

Together, these principles reinforce contractual certainty in mortgage law and limit opportunistic second-bite claims by mortgagees who fail to enforce their own rights in a timely manner.

Case Details

Year: 2025
Court: Appellate Division of the Supreme Court, New York

Judge(s)

Landicino

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