De-Acceleration of Loan Found Valid to Defeat Statute of Limitation Defense Notwithstanding Word Processing Error In Stipulation of Discontinuance
In a mortgage foreclosure action where Adam Leitman Bailey, P.C. participated in the appeal to the Appellate Division, Second Department the lower court refused to grant the mortgagee summary judgment on its foreclosure complaint and for an order of reference finding that there was an issue of fact as to whether the claim was time barred. A foreclosure action had been brought against the mortgagor in May 2011 but was then discontinued by stipulation in December 2016. However, the stipulation contained a typographical or word processing error. Instead of stating that the loan was de-accelerated, the stipulation provided that the “loan is de.” An affirmation submitted in support of the discontinuance similarly contained the incomplete statement that the case was discontinued and the loan was “de”.
After the discontinuance, the borrower received a Notice of De-Acceleration indicating that the acceleration of indebtedness that had been referred to in the complaint was rescinded and the mortgagor thus reverted the loan back to an installment loan. However, the borrower continued to be in arrears and a new foreclosure action was commenced in September 2017. The borrower’s answer set forth numerous defenses including that the new action was time barred because it was brought more than six years after the debt had been accelerated. Because of the typographical/word processing error where the stipulation of discontinuance and the supporting affirmation provided that the “loan is de”, the trial court denied summary judgment to both the mortgage and the borrower who also moved for summary judgment dismissing the foreclosure action.
On appeal, Adam Leitman Bailey, P.C. pointed out that the voluntary discontinuance and the subsequent actions of the mortgagee such as sending a Notice of De-Acceleration, treating the loan as an installment loan, and other actions showing that the loan had been de-accerlerated, required that the owner of the note and mortgage be granted summary judgment. The Appellate Division agreed, explaining that while the six year statute of limitations begins to run once the entire debt is accelerated by virtue of the commencement of a foreclosure action, the record showed that the 2011 action was voluntarily discontinued such that the acceleration of the debt was revoked, and, therefore, the subsequent foreclosure action was timely commenced. As a result the owner was granted summary judgment on its complaint and an order of reference.