Supreme Court, Suffolk County, May 16, 2023

McKinley Law, P.C., Lloyd Harbor, for IPA Asset Management, LLC, defendant.

Robertson, Anschutz, Schneid, Crane & Partners, PLLC, Westbury, for plaintiff.

It is ordered that the motion to dismiss is granted and the action is dismissed.

It is uncontroverted that the plaintiff commenced a foreclosure action involving property located at 8 Herson Path, Coram, New York in 2008. That action was discontinued based upon a settlement in 2011. The plaintiff commenced a second foreclosure action in 2012, which was discontinued by order dated July 28, 2017. The plaintiff has now commenced this present action on December 28, 2022, seeking foreclosure on the property based upon default on payment of the note. The defendant has moved to dismiss the action as barred by the statute of limitations.

Defendant argues that pursuant to the Foreclosure Abuse Prevention Act (FAPA) (L 2022, ch 821), effective December 30, 2022, which applies to all pending actions, a voluntary discontinuance is not a de-acceleration of the prior acceleration of the full payment of the loan and does not reset the statute of limitations (CPLR 3217 [e]). Therefore, either of the two earlier commencements of the action would be an acceleration of the loan and the accrual of the action (CPLR 203 [a]). As the statute of limitations for a foreclosure is six years (CPLR 213 [4]), the defendant argues that the action is time-barred.{**79 Misc 3d at 823}

The plaintiff argues that the two prior discontinuances did de-accelerate the loan and reset the statute of limitations as established by the New York Court of Appeals (Freedom Mtge. Corp. v Engel, 37 NY3d 1 [2021]). The plaintiff argues that FAPA should be interpreted to apply prospectively. If the statute applies retroactively, the statute would be unconstitutional.

Initially, the plain statement of the legislature in the enactment states that "[t]his act [FAPA] shall take effect immediately and shall apply to all actions commenced on an instrument described under subdivision four of section two hundred thirteen of the civil practice law and rules in which a final judgment of foreclosure and sale has not been enforced" (L 2022, ch 821, § 10). The plaintiff argues that the failure to use "prior action" in CPLR 3217 (e) indicates legislative intent not to apply the statute of limitations defense to this action.^[FN1] Besides the clear language of section 10, the committee report indicates that this statute "will restore longstanding law that made it clear that a lenders' discontinuance of a foreclosure action that accelerated a mortgage loan does not serve to reset the statute of limitations" (Assembly Mem in Support of 2021 NY Assembly Bill A7737, enacted as L 2022, ch 821). As the section was to restore the long-standing law, the legislative intent clearly was to apply to all pending cases. The long-standing law was, as the Second Department's jurisprudence pre-Engel required, an [*2]affirmative act to revoke its election to accelerate, and the discontinuance of an action, without more, was insufficient (see e.g. U.S. Bank Trust, N.A. v Aorta, 167 AD3d 807 [2d Dept 2018]). Similarly, the Senate indicated that the law was to stop the lenders from actions that "manipulate statutes of limitation to their advantage; and that the purpose of the present . . . legislation is to clarify the meaning of existing statutes, . . . and rectify erroneous judicial interpretations thereof" (Senate Introducer's Mem in Support of 2021 NY Senate Bill S5473, enacted as L 2022, ch 821). Therefore, the clear intention of the legislature was to quickly clarify application of the statute of limitations in foreclosure actions, which had been recently misapplied according to the legislature, indicating retroactive application. (See Matter{ of Gleason [Michael **79 Misc 3d at 824}Vee, Ltd.], 96 NY2d 117 [2001].) Therefore, applying the provisions, the six-year statute of limitations is a bar to the action (cf. U.S. Bank N.A. v Fox, 216 AD3d 445 [1st Dept 2023]).

The plaintiff argues that applying FAPA retroactively would be unconstitutional under several provisions of the United States Constitution.^[FN2] Initially, in addressing any constitutional attack, "[i]t is well settled that acts of the Legislature are entitled to a strong presumption of constitutionality" (American Economy Ins. Co. v State of New York, 30 NY3d 136, 149 [2017]).^[FN3] The plaintiff initially claims that to apply the statute retroactively would be an unconstitutional taking of their property,^[FN4] i.e., a lienhold established by Engel (United States v Security Industrial Bank, 459 US 70 [1982] [exempt household items from the property included within debtors' estates]). However, the plaintiff has not established any vested interest which was taken. FAPA continues to provide, as the law was at the time the plaintiff discontinued, that protection of their lien could be obtained by agreement. As noted, the Second Department's jurisprudence required an affirmative act to revoke its election to accelerate, and the discontinuance of an action, without more, was insufficient to revoke the acceleration (U.S. Bank Trust, N.A. v Aorta). FAPA only disallowed unilateral action to reset the statute of limitations (see General Obligations Law § 17-105). However, as both of the plaintiff's discontinuances were pre-Engel, the statute, as applied, did not take any vested rights from the plaintiff. Therefore, there was no abrogation of the plaintiff's lien as there was no reasonable reliance upon Engel when the plaintiff discontinued [*3]this action.^[FN5]

{**79 Misc 3d at 825}The plaintiff further argues that applying FAPA retroactively would violate due process, both substantive and procedural, under the Fourteenth Amendment to the United States Constitution. Therefore, to withstand constitutional scrutiny, "the retroactive application of the legislation [must be] justified by a rational legislative purpose" (Pension Benefit Guaranty Corporation v R. A. Gray & Co., 467 US 717, 730 [1984]). Here, the legislative purpose, as noted, was to correct an erroneous interpretation of the law. Furthermore, due to the gravity of the situation, the legislature sought "finality and repose that statutes of limitations are meant to ensure" (Assembly Mem in Support of 2021 NY Assembly Bill A7737, 2021 Senate Bill S5473, enacted as L 2022, ch 821). The legislation is rationally related to a legitimate governmental interest to satisfy substantive due process (see Forti v New York State Ethics Commn., 75 NY2d 596 [1990]; Deutsche Bank Natl. Trust Co. v Dagrin, 79 Misc 3d 393 [Sup Ct, Queens County 2023]).

As to procedural due process, the plaintiff argues that there should be a "grace period" where a statute's enactment shortens the existing statute of limitations. However, at the time of the first discontinuance, the plaintiff was on notice of the law that such action alone was not a de-acceleration without more specific evidence of a separate affirmative act. Moreover, as for the authority cited by the plaintiff (Brothers v Florence, 95 NY2d 290 [2000]), the statute involved an amendment to the statute of limitations provision. FAPA does not affect the statute of limitations nor the time the cause of action accrues. It limits the methods by which a plaintiff in a foreclosure action can reset the accrual date. Therefore, the plaintiff has not established a basis for finding a procedural due process violation nor a basis for a "grace period" (cf. Matter of County of Chemung v Shah, 28 NY3d 244 [2016]).

The plaintiff argues also that the FAPA violates the Contract Clause of the United States Constitution which holds that "[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts" (US Const, art I, § 10, cl 1). To establish a violation of the Contract Clause, there must be a substantial impairment of a contractual right. However, the plaintiff does not point to any clauses in the mortgage agreement that have been impaired. There existed no right to de-accelerate the loan in either the mortgage or the note. Therefore, there has been no{**79 Misc 3d at 826} constitutional violation of contractual rights (East Fork Funding LLC v U.S. Bank, N.A., 2023 WL 2660645, 2023 US Dist LEXIS 56719 [ED NY, Mar. 23, 2023, 20-CV-3404 (AMD) (RML)] [appeal filed Apr. 21, 2023]).

The plaintiff has failed to overcome the presumption of constitutionality of the application of FAPA to this action. Consequently, the motion to dismiss must be granted.