Invalid Mortgage Acceleration in Prior Foreclosure Action Cannot Estop Debtor under CPLR 213(4)

Introduction

Case: U.S. Bank Trust, N.A. v. Gruen, 2025 NYSlipOp 02235
Court: Appellate Division, Second Department, New York
Date: April 16, 2025

This case arises from a foreclosure action brought by U.S. Bank Trust, N.A. (“U.S. Bank”) against Allan L. Gruen (“the Defendant”). The key legal questions are whether the 2019 foreclosure action is time-barred under the six-year statute of limitations (CPLR 213(4)), whether U.S. Bank is estopped from challenging acceleration because of a prior 2009 foreclosure action, and whether the Defendant may cancel the mortgage under RPAPL 1501(4). The parties debated the effect of a prior dismissal for failure to comply with notice provisions on the debtor’s right to contest acceleration in a subsequent suit.

Summary of the Judgment

The Appellate Division affirmed the Supreme Court’s February 22, 2023 order (upon renewal and reargument) denying the Defendant’s cross-motion for summary judgment. The Defendant had argued (1) the 2019 action was barred by res judicata and collateral estoppel because the 2009 action was dismissed; (2) the six-year limitations period had run; and (3) he was entitled to cancel the mortgage under RPAPL 1501(4). The Court held:

The 2009 foreclosure did not validly accelerate the debt because Chase failed to serve the required default notice under paragraph 22 of the mortgage. That judicial determination defeats any estoppel under CPLR 213(4)(a).
Consequently, U.S. Bank is not estopped from claiming acceleration was invalid, and the six-year statute of limitations did not begin to run on the full debt in 2009.
The Defendant also failed to establish res judicata or collateral estoppel, and did not show the limitations period had expired.
His counter-claim under RPAPL 1501(4) to cancel the mortgage was similarly premature.

Costs were awarded to U.S. Bank.

Analysis

Precedents Cited

Reinman v. Deutsche Bank Natl. Trust Co. (215 AD3d 704) – Establishes that under RPAPL 1501(4), a debtor may seek cancellation once the statute of limitations has expired.
U.S. Bank N.A. v. Pearl-Nwabueze (218 AD3d 824) – Discusses amendments to CPLR 213(4) under the Foreclosure Abuse Prevention Act and the estoppel framework.
EMC Mtge. Corp. v. Patella (279 AD2d 604) – Clarifies that acceleration of all installments triggers the running of the statute of limitations on the full mortgage debt.
Bank of N.Y. Mellon v. Treitel (217 AD3d 911) – Confirms acceleration occurs via a foreclosure complaint demanding the full balance.
MLB Sub I, LLC v. Grimes (170 AD3d 992) – Holds that acceleration by complaint is invalid if the plaintiff lacked authority to accelerate at that time.
U.S. Bank N.A. v. Hazan (176 AD3d 637) – Emphasizes the contractual notice requirement as a condition precedent to acceleration.
Everhome Mtge. Co. v. Aber (195 AD3d 682, aff’d 39 NY3d 949) and Capital One, N.A. v. Saglimbeni (170 AD3d 508) – Address procedural and default notice prerequisites for valid acceleration.
U.S. Bank N.A. v. Friedman (175 AD3d 1341) – Discusses res judicata and collateral estoppel defenses in foreclosure contexts.

Legal Reasoning

1. Acceleration and Statute of Limitations: The Court reaffirmed that once a mortgage debt is validly accelerated, CPLR 213(4) imposes a six-year limitation on foreclosure of the entire balance (EMC Mtge. Corp. v. Patella; Bank of N.Y. Mellon v. Treitel).

2. Estoppel under CPLR 213(4)(a): The 2022 Foreclosure Abuse Prevention Act added CPLR 213(4)(a), barring a plaintiff from denying acceleration if a prior action accelerated the debt, unless that prior action was dismissed on an “expressed judicial determination” that acceleration was invalid. Here, the 2009 action was dismissed because Chase failed to comply with RPAPL 1304 and paragraph 22’s notice requirement. That constitutes the required judicial determination of invalid acceleration, so U.S. Bank may now argue that acceleration did not occur in 2009.

3. Notice-of-Default Requirement: Under RPAPL 1304 and paragraph 22 of the mortgage, advance notice is a condition precedent to acceleration. The initial trial court found Chase never served the mandatory notice, invalidating any attempt to accelerate.

4. Res Judicata and Collateral Estoppel: The Defendant’s attempt to apply claim and issue preclusion failed because the 2009 action did not adjudicate the same causes of action or issues in a manner that bars a new foreclosure; it only addressed procedural non-compliance.

Impact

This decision will guide both lenders and borrowers on the interplay between acceleration, notice requirements, and statutory estoppel provisions:

Lenders must strictly comply with contractual and statutory notice obligations before seeking full acceleration to preserve their right to foreclose and avoid estoppel defenses.
Borrowers gain clarity that a judicial finding of invalid acceleration in an earlier, dismissed foreclosure shields them from estoppel under CPLR 213(4).
Future Litigation will reference this ruling when parties dispute whether acceleration was validly effected and whether prior dismissals estop parties from relitigating acceleration.
Legislative Compliance under the Foreclosure Abuse Prevention Act will be measured by whether courts explicitly determine the invalidity of acceleration.

Complex Concepts Simplified

Acceleration: A lender’s formal declaration that the entire mortgage debt is due immediately, rather than requiring payment of individual installments.
Estoppel under CPLR 213(4): A rule that prevents a lender from denying acceleration occurred if it was asserted in a prior action, unless that action was dismissed with an explicit finding that the acceleration was invalid.
RPAPL 1501(4): A statute allowing a property owner to cancel a mortgage on record once the foreclosure limitation period has fully expired.
Res Judicata vs. Collateral Estoppel:
- Res judicata (claim preclusion) bars relitigation of the same cause of action after a final judgment.
- Collateral estoppel (issue preclusion) prevents re-arguing issues actually and necessarily decided in prior litigation.

Conclusion

U.S. Bank Trust, N.A. v. Gruen clarifies that a prior foreclosure action that is dismissed for failure to comply with required notice provisions results in an “expressed judicial determination” of invalid acceleration. Under the amended CPLR 213(4), such a determination prevents a lender from being estopped by that prior action and allows the lender to re-assert the validity of acceleration in a new foreclosure suit. Borrowers can challenge acceleration unless and until a plaintiff demonstrates both compliance with contractual notice requirements and authority to accelerate. This decision underscores the importance of precise procedural compliance in mortgage foreclosure litigation and sets a clear benchmark for invoking estoppel defenses under New York law.