Alert

The Court Sua Sponte Retroactively Applies FAPA to Dismiss Foreclosure

August 21, 2024

On July 31, 2024, the New York Supreme Court, Appellate Division: Second Department reversed the trial court’s denial of borrowers’ motion to dismiss a foreclosure action filed prior to the enactment of the Foreclosure Abuse Prevention Act (FAPA) because under the new “savings statute” for foreclosure actions under FAPA, plaintiff was precluded from recommencement since the first foreclosure was dismissed as abandoned under CPLR § 3215(c). [1]

Background

In this case, plaintiff’s predecessor commenced a foreclosure action in 2010, which was dismissed by the court on May 25, 2017, as abandoned under CPLR § 3215(c).  In September 2017, plaintiff commenced a new foreclosure.  Borrowers moved to dismiss the complaint arguing that it was time-barred because it was filed more than six years after the loan was accelerated when the first action commenced in 2010. The trial court denied the motion on March 11, 2022—prior to the enactment of FAPA, holding that plaintiff was entitled to the benefits of the “savings statute.” Borrowers then appealed.

Appellate Court’s Ruling on FAPA’s Retroactive Application

Notably, on appeal, neither party briefed any issues related to FAPA’s retroactive application even though FAPA was enacted five months prior to perfection of the appeal.  Rather, the parties’ arguments focused solely on plaintiff’s entitlement to recommencement under the pre-FAPA “savings statute.”

However, the Second Department sidestepped the parties’ arguments by initially noting that “[t]he recently enacted Foreclosure Abuse Prevention Act replaced the savings provision of CPLR 205(a) with CPLR 205-a in actions, like here, upon instruments described in CPLR 213(4),” and that such new provision excepts dismissals for any form of neglect, specifically including grounds under CPLR § 3215. Consequently, and without any further analysis of whether plaintiff qualified for the benefits of the pre-FAPA “savings statute,” the court held that “under FAPA, and contrary to the Supreme Court’s finding, the plaintiff is not entitled to the benefit of the savings provision of CPLR 205(a) or 205-a.”

Implications for Future Foreclosure Actions

Giangrande indicates that the Second Department deems the retroactive application of FAPA appropriate even though it has not yet issued a decision examining the validity of such application and constitutional implications arising in such context.  As such, litigants should expect the Second Department to reject constitutional challenges to FAPA and continue to retroactively apply the statute to all pending foreclosures.     

[1] U.S. Bank Tr., N.A. v. Giangrande, 2024 NY Slip Op 04095, 2024 WL 3588289 (2d Dep’t July 31, 2024).