While the New York State legislature continues to promulgate new statutes designed to make it easier for a statute of limitations defense to void a mortgage, existing rules and decisions continue unabated to frustrate and slam lenders. A recent case is a particularly vexing holding in this regard, certainly from a lender’s vantage point. [Deutsche Bank National Trust Company v. Rivera, 200 A.D.3d 1006, 160 N.Y.S.3d 311 (2d Dept. 2021)]
It is fairly well recognized that once a lender accelerates the balance due on a mortgage, either by sending a letter so declaring, or by initiating a mortgage foreclosure action reciting acceleration, the act of acceleration is quite resilient. That is, acceleration is not so easy to erase. It can be deaccelerated by an appropriate letter (with proof that it was delivered) or upon a discontinuance of the initial action, except that a new statute may diminish or eliminate this latter route.
In the new cited case, the lender initiated a foreclosure action in 2010, but it was dismissed 2015. A subsequent foreclosure was commenced in 2018 and the defendant moved to dismiss on the ground that the six year statute of limitations had expired.
The lender countered by asserting that the acceleration had been withdrawn by letter (which would have saved it), except that the court ruled the deacceleration letter offered in evidence was without a proper foundation for its admission as a business record. Moreover, plaintiff failed to demonstrate that the purported deacceleration letter was properly transmitted in accordance with the requirements of the mortgage – no evidence of standard office mailing procedure and no independent evidence of the actual mailing was produced.
That not uncommon problem for lenders is bad enough, but the exasperating twist in this case – and the real point of this discussion – was that the borrower had died prior to initiation of the action in 2010. The rule in that regard is that an action brought against a dead person is a nullity. This is standard and accepted. That being so, the lender argued here that because the initial action was a nullity, the acceleration attributable to the starting of that action likewise had to be a nullity. Therefore, there was no acceleration to cause the statute of limitations to begin to run until the 2018 foreclosure itself was brought.
That seems a very logical position to take. Again, if the 2010 foreclosure was always void, how could an acceleration engendered by that action possibly survive based upon a void action? Well, the court disagreed and held that even though the first action was a legal nullity from its inception, such “did not revoke or invalidate, or otherwise destroy, the plaintiff’s express invocation of the contractual election to accelerate the debt.”
This then is yet another example of the perils of lengthy foreclosures in New York. Here, the lender loses all; it collects not a farthing.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2022), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.