21ST Mortg. Corp. v. Nweke

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Docket Number

2015-11633

Attorney(S)

Staten Island Legal Services, Staten Island, NY (Randi Scherman of counsel), for appellant. Helfand & Helfand, New York, NY (Brian R. Elliott of counsel), for respondent.

Judges

John M. Leventhal

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Smart Summary

Factual and Procedural Background

In July 1999, Magdalene Nweke obtained a mortgage loan from Ameriquest Mortgage Company secured by real property in Staten Island. She defaulted on the mortgage payments, prompting Ameriquest to commence a foreclosure action in April 2006. A Judicial Hearing Officer found that Nweke was not properly served, leading to a stipulation discontinuing that action. Ameriquest initiated a second foreclosure action in September 2007, which was discontinued in January 2013. The mortgage and note were eventually assigned to the plaintiff, 21st Mortgage Corporation.

In March 2014, the plaintiff moved to vacate the discontinuance and restore the 2007 foreclosure action but withdrew the motion without explanation. The plaintiff then commenced the current foreclosure action in September 2014. Nweke answered asserting affirmative defenses including the statute of limitations and counterclaims seeking cancellation and discharge of the mortgage under RPAPL 1501(4) and attorneys' fees under Real Property Law § 282. The plaintiff moved for summary judgment on the complaint, and Nweke cross-moved for summary judgment dismissing the complaint as time-barred and on her counterclaims.

The Supreme Court, Richmond County, denied the plaintiff's motion, granted summary judgment dismissing the complaint as time-barred, denied the remainder of Nweke's cross motion, and sua sponte imposed an equitable mortgage in favor of the plaintiff. Nweke appeals from this order.

Legal Issues Presented

Whether the defendant Magdalene Nweke was entitled to summary judgment on her counterclaim to cancel and discharge the mortgage pursuant to RPAPL 1501(4) due to expiration of the statute of limitations.
Whether the defendant was entitled to summary judgment on her counterclaim for attorneys' fees and expenses pursuant to Real Property Law § 282 as the prevailing party.
Whether the Supreme Court properly imposed an equitable mortgage sua sponte in favor of the plaintiff without notice or opportunity to be heard.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
NMNT Realty Corp v Knoxville 2012 Trust, 151 AD3d 1068, 1069	Statute of limitations for mortgage foreclosure actions is six years under CPLR 213(4).	Confirmed that foreclosure actions are subject to a six-year statute of limitations.
Kashipour v Wilmington Sav. Fund Socy., FSB, 144 AD3d 985, 986	Once a mortgage debt is accelerated, the statute of limitations runs on the entire debt.	Supported the conclusion that the statute of limitations began running upon acceleration of the mortgage debt.
EMC Mtge. Corp. v Patella, 279 AD2d 604, 605	Same principle on acceleration triggering statute of limitations.	Reinforced the application of the statute of limitations in accelerated mortgage debt cases.
Lubonty v U.S. Bank N.A., 159 AD3d 962, 2018 NY Slip Op 083111	Acceleration of mortgage debt and statute of limitations timing.	Referenced in support of the timing of limitations on foreclosure actions.
Mizrahi v US Bank, N.A., 156 AD3d 617, 618	RPAPL 1501(4) allows cancellation and discharge of mortgage where statute of limitations expired.	Supported defendant’s entitlement to cancel and discharge the mortgage as time-barred.
JBR Constr. Corp. v Staples, 71 AD3d 952, 953	Opposition to summary judgment must raise triable issue of fact.	Found plaintiff failed to raise triable issue opposing defendant’s summary judgment.
LePore v Shaheen, 32 AD3d 1330, 1331	Same as above regarding summary judgment standards.	Confirmed plaintiff did not raise triable issues to defeat summary judgment.
Chase Home Fin., LLC v Kornitzer, 139 AD3d 784, 785	Due process requires notice and opportunity to be heard before imposing equitable mortgage.	Supported reversal of sua sponte imposition of equitable mortgage without notice.
Wachovia Mtge., FSB v Josef, 137 AD3d 1012, 1014	Same due process principle.	Further supported reversal of equitable mortgage imposition for lack of due process.
Payne v Wilson, 74 NY 348, 351	Equitable mortgage doctrine inapplicable where a valid legal written mortgage exists.	Supported rejection of equitable mortgage imposition in this case.
Allen v Union Fed. Mtge. Corp., 204 F Supp 2d 543, 546 (ED NY)	Same principle on equitable mortgage applicability.	Reinforced the inapplicability of equitable mortgage doctrine here.
DKR Mtge. Asset Trust 1 v Rivera, 130 AD3d 774	Prevailing party entitled to attorneys' fees under Real Property Law § 282.	Supported award of attorneys' fees to defendant as prevailing party.
640 Broadway Renaissance Co. v Rossiter, 256 AD2d 568, 569	Same principle on attorneys' fees to prevailing party.	Further supported award of attorneys' fees to defendant.

Court's Reasoning and Analysis

The court first confirmed that a foreclosure action is subject to a six-year statute of limitations under CPLR 213(4). It noted that acceleration of the mortgage debt triggers the running of this limitations period on the entire debt, citing well-established case law. The defendant demonstrated that more than six years had passed since acceleration, rendering the foreclosure action time-barred. The plaintiff failed to raise any triable issue of fact to oppose this showing, requiring the grant of summary judgment on the defendant’s counterclaim to cancel and discharge the mortgage pursuant to RPAPL 1501(4).

The court disagreed with the Supreme Court’s sua sponte imposition of an equitable mortgage in favor of the plaintiff, emphasizing that the plaintiff never requested this relief and that the defendant was denied notice and an opportunity to be heard, violating due process rights. Furthermore, the doctrine of equitable mortgage was inapplicable because a valid legal written mortgage existed.

Finally, the court held that the defendant, as the prevailing party, was entitled to attorneys' fees and expenses under Real Property Law § 282. The Supreme Court should have granted summary judgment on that counterclaim as well.

Holding and Implications

The order of the Supreme Court is reversed insofar as appealed from. The defendant Magdalene Nweke’s cross motion for summary judgment to cancel and discharge the mortgage pursuant to RPAPL 1501(4) and for an award of attorneys' fees and expenses pursuant to Real Property Law § 282 is granted. The portion of the order imposing an equitable mortgage in favor of the plaintiff is vacated. The matter is remitted for a hearing to determine the amount of attorneys' fees and expenses to be awarded and thereafter for entry of judgment canceling and discharging the mortgage and awarding such fees.

The direct effect is that the foreclosure action is dismissed as time-barred, and the defendant is entitled to attorneys' fees. No new precedent is established beyond application of existing statutory and case law principles.

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21st Mortgage Corporation, etc., respondent, v. Magdalene Nweke, appellant, et al., defendants.

JOHN M. LEVENTHAL, J.P.

SANDRA L. SGROI SYLVIA O. HINDS-RADIX COLLEEN D. DUFFY, JJ. (Index No. 130282/14)

Staten Island Legal Services, Staten Island, NY (Randi Scherman of counsel), for appellant.

Helfand & Helfand, New York, NY (Brian R. Elliott of counsel), for respondent.

DECISION & ORDER

In an action to foreclose a mortgage, the defendant Magdalene Nweke appeals from an order of the Supreme Court, Richmond County (Judith N. McMahon, J.), dated September 11, 2015. The order, insofar as appealed from, denied those branches of that defendant's cross motion which were for summary judgment on her counterclaims to cancel and discharge the subject mortgage pursuant to RPAPL 1501(4) and for an award of attorneys' fees and expenses pursuant to Real Property Law § 282 and, sua sponte, imposed an equitable mortgage in favor of the plaintiff.

ORDERED that on the Court's own motion, the notice of appeal from so much of the order as, sua sponte, imposed an equitable mortgage in favor of the plaintiff is deemed to be an application for leave to appeal from that portion of the order, and leave to appeal is granted (see CPLR 5701[c]); and it is further,

ORDERED that the order is reversed insofar as appealed from, on the law, those branches of the cross motion of the defendant Magdalene Nweke which were for summary judgment on her counterclaims to cancel and discharge the subject mortgage pursuant to RPAPL 1501(4) and for an award of attorneys' fees and expenses pursuant to Real Property Law § 282 are granted, that portion of the order which imposed an equitable mortgage in favor of the plaintiff is vacated, and the matter is remitted to the Supreme Court, Richmond County, for a hearing, to be held forthwith, to determine the amount of attorneys' fees and expenses to be awarded to the defendant Magdalene Nweke pursuant to Real Property Law § 282, and thereafter for the entry of a judgment canceling and discharging the subject mortgage and awarding such attorneys' fees and expenses; and it is further,

ORDERED that one bill of costs is awarded to the defendant Magdalene Nweke.

In July 1999, the defendant Magdalene Nweke (hereinafter the defendant) obtained a loan from Ameriquest Mortgage Company (hereinafter Ameriquest), which was secured by a mortgage on her real property in Staten Island. The defendant defaulted on her mortgage payments, and on April 6, 2006, Ameriquest commenced an action to foreclose the mortgage (hereinafter the 2006 foreclosure action). Following a traverse hearing, a Judicial Hearing Officer determined that the defendant was not properly served with the summons and complaint. The parties subsequently entered into a stipulation discontinuing the 2006 foreclosure action.

On September 17, 2007, Ameriquest commenced a second foreclosure action (hereinafter the 2007 foreclosure action), which, upon Ameriquest's motion, was discontinued by order dated January 24, 2013. After a series of assignments, the note and the mortgage were transferred by assignment to the plaintiff. In March 2014, the plaintiff moved, inter alia, to vacate the order discontinuing the 2007 foreclosure action and to restore that action to the active calendar. Thereafter, in April 2014, the plaintiff, without explanation, withdrew its motion to restore.

In September 2014, the plaintiff commenced this action to foreclose the mortgage. In her answer, the defendant asserted six affirmative defenses, including the statute of limitations, as well as counterclaims, inter alia, to cancel and discharge the mortgage pursuant to RPAPL 1501(4) and for an award of attorneys' fees and expenses pursuant to Real Property Law § 282. Thereafter, the plaintiff moved, inter alia, for summary judgment on the complaint insofar as asserted against the defendant. The defendant cross-moved for summary judgment dismissing the complaint insofar as asserted against her as time-barred and for summary judgment on her counterclaims to cancel and discharge the mortgage pursuant to RPAPL 1501(4) and for an award of attorneys' fees and expenses pursuant to Real Property Law § 282.

In an order dated September 11, 2015, the Supreme Court denied the plaintiff's motion and granted that branch of the defendant's cross motion which was for summary judgment dismissing the complaint as barred by the applicable statute of limitations. The court denied the remainder of the defendant's cross motion and, sua sponte, imposed an equitable mortgage on the subject premises in favor of the plaintiff. The defendant appeals.

An action to foreclose a mortgage is subject to a six-year statute of limitations (see CPLR 213[4]; NMNT Realty Corp. v Knoxville 2012 Trust, 151 AD3d 1068, 1069). " [E]ven 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'" (Kashipour v Wilmington Sav. Fund Socy., FSB, 144 AD3d 985, 986, quoting EMC Mtge. Corp. v Patella, 279 AD2d 604, 605; see Lubonty v U.S. Bank N.A., 159 AD3d 962, lv granted _____ NY3d _____, 2018 NY Slip Op 083111 [2018]).

RPAPL 1501(4) provides that "[w]here the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage . . . has expired," any person with an estate or interest in the property may maintain an action "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" (see Mizrahi v US Bank, N.A., 156 AD3d 617, 618).

Here, the defendant established her prima facie entitlement to judgment as a matter of law on her counterclaim pursuant to RPAPL 1501(4) to cancel and discharge the mortgage by demonstrating that more than six years had passed since the mortgage was accelerated and therefore this foreclosure action was time-barred (see NMNT Realty Corp. v Knoxville 2012 Trust, 151 AD3d at 1070; Kashipour v Wilmington Sav. Fund Socy., FSB, 144 AD3d at 986). The plaintiff did not raise a triable issue of fact in opposition (see JBR Constr. Corp. v Staples, 71 AD3d 952, 953; LePore v Shaheen, 32 AD3d 1330, 1331). Thus, the Supreme Court should have granted that branch of the defendant's cross motion which was for summary judgment on her counterclaim pursuant to RPAPL 1501(4) to cancel and discharge the mortgage (see CPLR 213[4]; RPAPL 1501[4]; JBR Constr. Corp. v Staples, 71 AD3d at 953; LePore v Shaheen, 32 AD3d at 1331).

We disagree with the Supreme Court's determination to impose an equitable mortgage in favor of the plaintiff. The plaintiff never requested this relief, and the defendant was not afforded any notice nor an opportunity to be heard on this issue which amounted to a denial of the defendant's due process rights (see Chase Home Fin., LLC v Kornitzer, 139 AD3d 784, 785; Wachovia Mtge., FSB v Josef, 137 AD3d 1012, 1014). In any event, the doctrine of equitable mortgage is inapplicable to the circumstances of this case, where a legal written mortgage existed (see Payne v Wilson, 74 NY 348, 351; Allen v Union Fed. Mtge. Corp., 204 F Supp 2d 543, 546 [ED NY]).

The Supreme Court also should have granted that branch of the defendant's cross motion which was for summary judgment on her counterclaim for an award of attorneys' fees and expenses pursuant to Real Property Law § 282 since she was the prevailing party (see DKR Mtge. Asset Trust 1 v Rivera, 130 AD3d 774; 640 Broadway Renaissance Co. v Rossiter, 256 AD2d 568, 569).

LEVENTHAL, J.P., SGROI, HINDS-RADIX and DUFFY, JJ., concur.

2015-11633 DECISION & ORDER ON MOTION

21st Mortgage Corporation, etc., respondent,

v Magdalene Nweke, appellant, et al., defendants.

(Index No. 130282/14)

Motion by the respondent to dismiss an appeal from an order of the Supreme Court, Richmond County, dated September 11, 2015, on the ground that the portion of the order appealed from is not appealable as of right (see CPLR 5701). By decision and order on motion of this Court dated January 22, 2016, the motion was held in abeyance and referred to the panel of Justices hearing the appeal for determination upon the argument or submission thereof.

Upon the papers filed in support of the motion and the papers filed in opposition thereto, and upon the argument of the appeal, it is

ORDERED that the motion is denied as academic.

LEVENTHAL, J.P., SGROI, HINDS-RADIX and DUFFY, JJ., concur. ENTER:

Aprilanne Agostino

Clerk of the Court