Preview
UD U 0 IK DV INDEX NO. 604853/2015
NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023
EXHIBIT 3
OUN IK 09 DV INDEX NO. 604853/2015
NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 05/03 2023
ON RD 4805
NYSCEF BOC. NO. 18 “RECEIVED NYSCEF: 03/30/2023
To be argued by:
MARK 8S. GRUBE
15 minutes requested
Supreme Court of the State of Pew Work
Appellate Division — Third Department
No. 534805
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for
the Registered Holder of Equifirst Mortgage Loan
Trust 2004-2 Asset-Backed Certificates, Series 2004-2,
Plaintiff-Appellant,
Vv
MICHAEL DELUCA,
Defendant-Respondent,
ATTORNEY GENERAL OF THE STATE OF NEW YORK,
Intervenor-Respondent.
(Caption continues inside front cover)
BRIEF FOR INTERVENOR-RESPONDENT
LETITIA JAMES
Attorney General
State of New York
BARBARA D. UNDERWOOD Attorney for Intervenor-Respondent
Solicitor General 28 Liberty Street
ESTER MURDUKHAYEVA New York, New York 10005
Deputy Solicitor General (212) 416-8028
MARK 8S. GRUBE mark.grube@ag.ny.gov
Assistant Solicitor General
of Counsel Dated: March 30, 2023
Supreme Court, Otsego County — Index No. EF2020-623
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(Caption continues from front cover)
-and-
KEY BANK, NATIONAL ASSOCIATION, MIDLAND FUNDING LLC and
“John Doe #1” through “John Doe #12” the last twelve names being fictitious
and unknown to plaintiff, the persons or parties intended being the tenants,
occupants, persons, or corporations, if any, having or claiming interest
in or lien upon the premises described in the complaint,
Defendants.
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES eee ecececeeeceeeeeeneeeeenseeseneaeneceseneeeeeteeneeee
ease en eneeenes ll
PRELIMINARY STATEMENT dee ceeececeeneneeeeeneneneceseeeceeeenseeeeeaeeesesesececeteteee
QUESTION PRESENTED dete en ececeeeceeeenenseeeenesesesesesececesetseneeeeseeeeeeaeeeneeenenes
STATEMENT OF THE CASE detec ee eeeeeeeeneeeeeneaececesesececeseteeeseenseeeeeeeseneeenenes
A Mortgage Agreements and Foreclosure Litigation
Following the 2007-2008 Financial Crisis dete eeececeeeeeeeeeseeneneeenes
B New York’s Savings Clause debe ee eee eeececeeeceeeeeenseeeeseeesesesesececeneeee
C The Foreclosure Abuse Prevention Act (FAPA) detec eeeeeneeeeenenes
D This Foreclosure Action det eteeeeneeeeeseaececeseeececeteeseeeeeeseeeeneaenenegenes 12
ARGUMENT
FAPA COMPORTS WITH THE STATE AND FEDERAL CONSTITUTIONS seeeeeee 14
A. FAPA Comports with the Due Process Clause a et eeeeeeeeeeeneeeees 14
1 The Legislature intended FAPA to apply
LECVOACTIVELY. oo. eeeeeceeeeeeeeeeeeceteeeeneeeeeceaeeeeaeeeeeeeeeenaeess 15
2 FAPA does not impair any vested rights...... deeeeeees 18
3 FAPA’s retroactive scope is rational seteeeeeeeeeeseeeneeeeeneeeeenes 21
B. FAPA Comports with the Takings Clause se eeeeeeeee deeeeeees 23
CONCLUSION dee ec ee eeeeeeneeeeeeenenececeeeeneneeensee
eee eneeeeeeeeeeeeeenseeeeeaeneseneteeesereee 27
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TABLE OF AUTHORITIES
Cases Page(s)
American Economy Ins. Co. v. State of New York,
30 N.Y.3d 136 (2017) det eeeeeenenenecenenececeteeeeeeeenseeeeneaesesenesecesereteeeees 15, 21-22
Andrea v. Arnone, Hedin, Casker, Kennedy & Drake, Architects
& Landscape Architects, P.C. (Habiterra Assoc.),
5 N.Y.3d 514 (2005) eben ecececeneceeeeeeneeeeeenecesenececeteeeseeeeeteeeeeenes 7-8, 18, 24
Bank of N.Y. Mellon v. Slavin,
156 A.D.3d 1073 (38d Dep’t 2017) dee ceeececeeeeneeeeeeeeneeesenececeteeeteeeeeteeeeeenes
Bank of N.Y. v. Mohammed,
130 A.D.3d 1419 (38d Dep’t 2015) sevens sevens sevens seseeeeeeee
Bank of N.Y. v. Treco,
240 F.3d 148 (2d Cir. 2001) dee eeeeeceeeeneeeeenenenecesenececereeeseeeeeteeeeaeaeseeesenes 23
Brothers v. Florence,
95 N.Y.2d 290 (2000) dee eteeeeneeenenececeseenceeeesseeeeeaeseeeceseeeseeeenseeeeeeenenenenes 20
Chase Secs. Corp. v. Donaldson,
325 U.S. 304 (1945) eben ecececeeneeceeneeeeeeenenecenececeseteeeeeeeseeeeeeeneeeseseterereeeee 22
Connolly v. Pension Benefit Guar. Corp.,
475 U.S. 211 (1986) debe ececeneenceceeneeeeeeaeneneceseteceseseseseesseeeeseaesececereterereeene 26
Deutsche Bank Natl. Trust Co. v. Gouin,
194 A.D.3d 479 (1st Dep’t 2021) dec eceeeeneeeeeneneneceneeeceeeeeseeeeneeaeneaesececeteeee
East Fork Funding LLC v. U.S. Bank, N.A.,
No. 20-ev-3404 (E.D.N.Y. Mar. 23, 2023) dee eeeeeenee eee eeenececeteeeseeeenteeeeneee 22
Freedom Mtge. Corp. v. Engel,
37 N.Y.3d 1 (2021) dace ceeeeeceeneneeee sence eceneneceeeenseeeeneeeesenesececeseeseeeeeeseeneneee 4-5
Funkhouser v. J.B. Preston Co.,
290 U.S. 163 (1933) eben ecececeeneeceeneeeeeeenenecenececeseteeeeeeeseeeeeeeneeeseseterereeeee 14
INDEX NO. 604853/2015
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Cases Page(s)
George v. Mt. Sinai Hosp.,
47 N.Y.2d 170 (1979) det eeeeeeeea ence ener ececeseeeeeeneneeeeseseneceseneceseteenteee
seen enenenenes
GMAT Legal Title Trust 2014-1 v. Kator,
213 A.D.3d 915 (2d Dep’t 2023) det eteeeeneeeeeseaececeseeececeteeseeeeeeseeeeneaenenegenes 18
John J. Kassner & Co. v. City of New York,
46 N.Y.2d 544 (1979) debt eeeeaenecececeeneeceeneeeeaeaenececeseteeeeeenseeeeeaeseseseneeesereee 26
Landgraf v. USI Film Prods.,
511 U.S. 244 (1994) dee eeeececeeeeeeeeneneeeeenececesetececeteseeeeneaeeeseaesecesereteee 15, 18
LaValle v. Hayden,
98 N.Y.2d 155 (2002) debt eeeeaenecececeeneeceeneeeeaeaenececeseteeeeeenseeeeeaeseseseneeesereee 14
Lingle v. Chevron U.S.A. Inc.,
544 U.S. 528 (2005) sete ence eceeeeeeeeneneeeeenesesesesenececeseseceseensereeeseteeeneseees 23-24
Loretto v. Teleprompter Manhattan CATV Corp.,
458 U.S. 419 (1982) eee eeececeeecneeeeeneeeeeneneneeesenececeteeeseenenseeeeaeeeseseseteeeeeteee 23
Marrero v. Crystal Nails,
114 A.D.3d 101 (2d Dep’t 2013) det eteeeeneeeeeseaececeseeececeteeseeeeeeseeeeneaenenegenes 11
Matter of Gleason (Michael Vee, Ltd.),
96 N.Y.2d 117 (2001) eben ee ee ee enececeeneeeeeneneeaeseseceseseteeeeeenseeeeaeaeseseseneeesereee 16
Matter of Regina Metropolitan Co., LLC v. New York State
Division of Housing and Community Renewal,
35 N.Y.3d 332 (2020) eben eceeeeenececeeneeeeeneneeeeeaenececeseteeeeeeeaeeeseneneeeeeteeesetees 19
Matter of Winston v. Freshwater Wetlands Appeals Bd.,
224 A.D.2d 160 (2d Dep’t 1996) det eeeeeeeee ene en enececeteeeceeeenseeeeneeeesesenesesenenes
Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig.,
30 N.Y.3d 377 (2017) eben ee ee ee enececeeneeeeeneneeesenenececeseteeeeeeseaeeeeeaeseeeeeteeereeee® 15
Penn Cent. Transp. Co. v. City of New York,
438 U.S. 104 (1978) dee enececeeeeeeeeneneeeseseneneceseneceeeeeeeeeee
ease eneeesenecesereeereeeee 25
iii
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Cases Page(s)
Pennsylvania Coal Co. v. Mahon,
260 U.S. 393 (1922) eee eeececeeecneeeeeneeeeeneneneeesenececeteeeseenenseeeeaeeeseseseteeeeeteee 23
Pension Benefit Guar. Corp. v. R.A. Gray & Co.,
467 U.S. 717 (1984) debe n ee ececeeneeceeneneeeaeeneneceseeececeseseeeeneeeesenesesecereeeee 15, 21
People v. Allen,
198 A.D.3d 531 (1st Dep’t 2021) dec eceeeeneeeeeenececeeeeeceeeenseeeeeaeseseseneceeereee 19
Tahoe-Sierra Preserv. Council, Inc. v. Tahoe Regional
Planning Agency,
535 U.S. 302 (2002) eee eeececeeecneeeeeneeeeeneneneeesenececeteeeseenenseeeeaeeeseseseteeeeeteee 24
United States Fid. & Guar. Co. v. Smith Co.,
46 N.Y.2d 498 (1979) det eeeeeeeea ence ener ececeseeeeeeneneeeeseseneceseneceseteenteee
seen enenenenes
Wells Fargo Bank, N.A. v. Eitani,
148 A.D.3d 193 (2nd Dep’t 2017) dee eceeeeeeeeeeneeeeeneaeeesesesececeseeeeeeeteeeseeees 6,8
Wells Fargo Bank N.A. v. Kehres,
199 A.D.3d 869 (2d Dep’t 2021) det eeeeeeneeeeeneaececeeenececeseeseeeeeeseeeeeeaeeeneeenenes
Constitutions
U.S. Const. amend. V seen ence eceeeeeeeesenseeeeneeeseceaesececesetecesereseeeeneeeeeeaesesesenenes 23
Laws
Ch. 821, 2022 N.Y. Laws, p. 1 dee eceeeeneeeeeeeeeneeeseneeeseneneeeees 9-10, 12, 16-17, 25
C.P.L.R.
205 seeeeeee sevens sevens sevens sevens seceeeneeeee 1, 6, 10-11
205-a .10-11
213 seeeeee seeeee seeeeeneeee
General Obligations Law § 17-105 wees ec ececeeeeneeeeeneaeneeeeenececeseteseseeeseseeeeeeee 24
lv
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Miscellaneous Authorities Page(s)
Bill Jacket for ch. 821 (2022)
Assembly Sponsor’s Mem. .........::ceccesceeceeseeeeeeteeseeeeeeee 9-11, 16-17, 21-22
Letter from New Yorkers for Responsible Lending, to Kathy
Hochul, Governor (May 9, 2022) sees teeeee dececeeeeeeeeeeeeeeeeeee 5-6
Senate Introducer’s Mem. .... 9-11, 17, 21-22
Fannie Mae, Fannie Mae Legal Documents (updated July 2021),
https://singlefamily.fanniemae.com/fannie-mae-legal-
documents seeeeeeeee teeeee teeeee teeeee deeeeeeenee
Fannie Mae, Security Instruments, New York Standard Form
(No. 3033) (July 2021), https://singlefamily.fanniemae.com/
media/document/docx/legal-documents/form-3033 seseeeeeee seeeeeee 4-5
Lawrence K. Marks, 2015 Report of the Chief Administrator of
the Courts (2015), https://ww2.nycourts.gov/sites/default/
files/document/files/2018-06/2015ForeclosureReport.pdf .. deeeeeeenee
N.Y. Assembly Debate on A. 7737B (Mar. 23, 2022) deen eeeceeeeeeeeeeeeeees 16-17
N.Y. Senate Debate on S. 5473D (May 8, 2022) deen ec ececeeeeeeeeeeeseeeeeeneeeeenes 16
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PRELIMINARY STATEMENT
New York law has long afforded certain litigants the ability to refile
a timely commenced action within six months of a dismissal without
prejudice, even if the refiling would otherwise be untimely. See C.P.L.R.
205(a). Notably, the statute has always precluded refiling in cases where
the plaintiff neglected to prosecute its first action. Although this “savings”
statute was intended for diligent litigants, several appellate courts
mistakenly allowed plaintiffs in foreclosure cases to refile dismissed
actions notwithstanding those plaintiffs’ failures to pursue their original
claims. In response to these erroneous holdings and other abuses in
foreclosure litigation, the Legislature enacted the Foreclosure Abuse
Prevention Act (FAPA). As relevant here, FAPA clarifies that lenders
whose initial actions are dismissed for, among other reasons, violation of
court rules, failure to comply with court orders, or for nonappearance at
mandatory conferences, are not entitled to a grace period to file a new
action after the statute of limitations has run.
Plaintiff-appellant Deutsche Bank National Trust Company asserts
that the retroactive application of FAPA to this pending foreclosure claim
violates provisions of the federal and state Constitutions. Pursuant to
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Executive Law § 71 and C.P.L.R. 1012(b), the Attorney General now
intervenes in this action to defend the constitutionality of FAPA’s applica-
tion to this and other pending matters.
First, FAPA’s retroactive application does not violate the Due
Process Clause. The Legislature plainly intended to give FAPA retroac-
tive effect to effectuate its remedial purpose and restore the longstanding
law governing the application of C.P.L.R. 205(a)’s savings provision to
mortgage foreclosure claims. Plaintiff has no vested right in pursuing
successive mortgage foreclosure actions after neglecting a prior action
and allowing the statute of limitations to run. And even if FAPA did
disturb a vested right, it would still withstand constitutional scrutiny
because it has a rational basis: ensuring that lenders cannot manipulate
1 To date, the Attorney General has received over twenty notices of
constitutional challenges to FAPA in trial and appellate courts. In addi-
tion to this case, the Attorney General has intervened in U.S. Bank
National Association v. Corcuera, No. 2020-06138 (2d Dep’t) and U.S.
Bank National Association v. Simon, No. 2020-09391 (2d Dep't). Although
the Attorney General has declined to intervene in other cases, she has
made clear that no inference adverse to the State should be drawn from
those decisions. The Attorney General’s position supporting the constitu-
tionality of the law will be reflected in this brief and the briefs filed in
Corcuera and Simon.
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the statute of limitations and thereby undermine the public interest in
finality and repose.
Second, FAPA’s retroactive application does not implicate the
Takings Clause. FAPA does not interfere with any vested property rights;
it simply clarifies the law governing when a mortgage foreclosure
plaintiff may invoke the savings provision. And even if FAPA did impair
a vested property right, plaintiff has not shown either a physical taking
or a regulatory taking.
QUESTION PRESENTED
Whether the retroactive application of the Foreclosure Abuse
Prevention Act’s amendments to C.P.L.R. 205(a) violates due process or
the Takings Clause.
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STATEMENT OF THE CASE
A. Mortgage Agreements and Foreclosure Litigation
Following the 2007-2008 Financial Crisis
A loan to finance the purchase of residential property is generally
memorialized in two instruments. First, the borrower executes a promis-
sory note, in which the borrower agrees to be personally responsible for
repaying the loan. Second, the borrower executes a security instrument,
or mortgage, in which the noteholder receives a security interest in the
residential property. Borrowers generally agree to repay the loan in
installments over time, often a fifteen-to-thirty-year period, with interest.
See Freedom Mige. Corp. v. Engel, 37 N.Y.3d 1, 21 (2021).?
In the event of a default, such as a failure to make an installment
payment, a common provision known as an “acceleration clause” gives the
lender the right, but not the obligation, to require immediate payment of
the remaining balance owed under the promissory note and the mortgage.
A lender may invoke an acceleration clause by commencing a foreclosure
2 See also Fannie Mae, Security Instruments, New York Standard
Form (No. 3033), § 1 (July 2021). See generally Fannie Mae, Fannie Mae
Legal Documents (updated July 2021). (For sources available online, full
URLs appear in the Table of Authorities. All URLs were last visited on
March 30, 2023.)
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action, an equitable remedy permitting the noteholder to take possession
of the real property securing the debt.
Like other actions for breach of contract, actions arising from the
alleged breach of a mortgage agreement are subject to a six-year statute
of limitations. See C.P.L.R. 213(2), (4); see also Engel, 37 N.Y.3d at 19.
Before a lender elects to accelerate a loan, a six-year statute of limitations
runs anew with respect to each missed installment payment. After a
lender elects to accelerate a loan, the six-year statute of limitations runs
on the entire amount due under the note and mortgage as of the date of
acceleration.4
In the years following the 2007-2008 financial crisis, New York
courts were flooded with residential foreclosure actions, most of which
were default proceedings without any involvement by the defendant
homeowners. The plaintiff lenders in many cases “relied on documents
‘robo-signed’ by bank representatives who claimed to have personally
3 See Engel, 37 N.Y.3d at 21; see also Letter from New Yorkers for
Responsible Lending, to Kathy Hochul, Governor 1-3 (May 9, 2022), in
Bill Jacket for ch. 821 (2022); Fannie Mae, New York Standard Form,
supra, § 26.
4 See Engel, 37 N.Y.2d at 21-22 & n.3; Letter from New Yorkers for
Responsible Lending, supra, at 1.
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reviewed thousands of documents in implausibly short periods of time.”
Lawrence K. Marks, 2015 Report of the Chief Administrator of the Courts
6 (2015) (pursuant to L. 2009, ch. 507). Because of inadequate docu-
mentation “plaintiffs were unable to proceed with their cases.” Id. As a
result, many lenders subjected borrowers to multiple, successive
foreclosure actions. See Letter from New Yorkers for Responsible
Lending, supra, at 3.
B New York’s Savings Clause
In seventeenth century England, the common law allowed a party,
“whose action had abated for matter of form, a reasonable time within
which to journey to court to sue out a writ.” Wells Fargo Bank, N.A. v.
Eitani, 148 A.D.3d 193, 200 (2nd Dep’t 2017) (quotation marks omitted).
This practice has existed in New York law in some form since at least
1788. See id. Since the C.P.L.R. was enacted in 1962, it has provided that
a plaintiff may timely commence a new action if it is filed within six
months of a timely action that was not terminated for, among other
reasons, “a dismissal of the complaint for neglect to prosecute the action.”
C.P.LR. 205(a).
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This savings period “serves the salutary purpose of preventing a
Statute of Limitations from barring recovery where the action, at first
timely commenced, has been dismissed due to a technical defect which
can be remedied in a new action.” United States Fid. & Guar. Co. v. Smith
Co., 46 N.Y.2d 498, 505 (1979). It ensures that litigants are afforded “a
genuine bite at the apple,” Matter of Winston v. Freshwater Wetlands
Appeals Bd., 224 A.D.2d 160, 164 (2d Dep’t 1996), by providing “a second
opportunity to the claimant who has failed the first time around because
of some error pertaining neither to the claimant’s willingness to prosecute
in a timely fashion nor to the merits of the underlying claim,” George v.
Mt. Sinai Hosp., 47 N.Y.2d 170, 178-79 (1979).
Consistent with the underlying purpose of the savings period, the
Court of Appeals has not limited the scope of the neglect exception to
dismissals for want of prosecution under C.P.L.R. 3216. Rather, it applies
“whenever neglect to prosecute is in fact the basis for dismissal.” Andrea
v. Arnone, Hedin, Casker, Kennedy & Drake, Architects & Landscape
Architects, P.C. (Habiterra Assoc.), 5 N.Y.3d 514, 520 (2005). For example,
a litigant whose action is dismissed for failure to comply with discovery
deadlines and scheduling orders is not entitled “to start all over again,
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after the statute of limitations has expired.” Id. at 521. Despite this
precedent, in the years following the onslaught of foreclosure litigation
in 2007-2008, the Departments of the Appellate Division developed laxer
rules for mortgage foreclosure plaintiffs, allowing them to pursue new
actions, even when they neglected their prior action.
For instance, in Hitani, plaintiff filed a foreclosure action but then
failed to prosecute the action for approximately eight years after defend-
ant defaulted. An administrative judge clearing the docket dismissed the
action as abandoned pursuant to C.P.L.R. 3215(c), which provides for
dismissal when plaintiff “fails to take proceedings for the entry of judg-
ment within one year after the default.” Despite the record showing years
of inactivity in the initial foreclosure action, the Second Department
allowed the plaintiff to invoke the savings provision and pursue another
action, concluding that the prior dismissal pursuant to C.P.L.R. 3215(c)
did not preclude the application of C.P.L.R. 205(a)’s savings period. See
Eitani, 148 A.D.3d at 195-96.>
5 See also Deutsche Bank Natl. Trust Co. v. Gouin, 194 A.D.3d 479,
481 (1st Dep’t 2021) (permitting use of C.P.L.R. 205(a)); Wells Fargo
Bank N.A. v. Kehres, 199 A.D.3d 869, 871 (2d Dep’t 2021) (same).
8
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And in another case, plaintiff not only failed to act for years after
defendant’s default, but also failed to appear at a status conference, and
then failed to appear again at a conference on its motion to vacate the
dismissal of the complaint for failing to appear at the prior conference.
This Court affirmed dismissal of the initial foreclosure action based on
plaintiff's “absence of a reasonable excuse” for failing to appear at confer-
ences. See Bank of N.Y. v. Mohammed, 130 A.D.3d 1419, 1420 (3d Dep’t
2015). But despite this extensive record of neglect, the Court later
concluded that plaintiff could avail itself of C.P.L.R.’s 205(a)’s grace period
and try again in a successive foreclosure action. Bank of N.Y. Mellon v.
Slavin, 156 A.D.3d 1073, 1074 (3d Dep’t 2017).
Cc The Foreclosure Abuse Prevention Act (FAPA)
The Legislature passed FAPA in May 2022, and it was signed into
law by Governor Kathy Hochul in December 2022. See Ch. 821, 2022 N.Y.
Laws, p. 1. The purpose of FAPA is to address “ongoing problem[s] with
abuses of the judicial foreclosure process.” Assembly Sponsor’s Mem. at 1,
in Bill Jacket, supra; accord Senate Introducer’s Mem. at 1, in Bill Jacket,
supra. The Legislature found that these problems were “exacerbated by
recent court decisions which, contrary to the intent of the legislature”
9
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gave lenders opportunities to “manipulate statutes of limitation to their
advantage” at the expense of the “finality and repose” provided by the
statute of limitations. Assembly Sponsor’s Mem., supra, at 1; see Senate
Introducer’s Mem., supra, at 1. Two of FAPA’s substantive provisions are
relevant here.
First, FAPA § 5, codified at C.P.L.R. 205(c), provides that the savings
period applicable to mortgage foreclosure claims is covered by the specific
provisions contained in C.P.L.R. 205-a, described below, rather than the
general provisions contained in C.P.L.R. 205(a). C.P.L.R. 205(c). The
Legislature removed foreclosure actions from the scope of C.P.L.R. 205(a)
because of “extraordinary abuse and judicial misinterpretation” of that
provision as applied to foreclosure actions.® See Senate Introducer’s
Mem., supra, at 10.
Second, FAPA § 6, codified at C.P.L.R. 205-a, provides a new
savings provision for foreclosure actions. The provision is modeled on
C.P.L.R. 205(a), but provides more specific language clarifying the
6 The Legislature specifically identified the decisions in Slavin,
Eitani, and Gouin as inconsistent with legislative intent. See Senate
Introducer’s Mem., supra, at 10.
10
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meaning of neglect and specifying the types of dismissals that constitute
neglect, including dismissal for violation of court rules, failure to comply
with scheduling orders, and for nonappearance.’ C.P.L.R. 205-a responds
to “judicial decisions that have been contrary to the spirit of th[e] savings
provision” by being “overly indulgent of foreclosure plaintiffs whose cases
have been dismissed for various forms of neglect” and clarifies that the
savings provision is “for diligent plaintiffs whose cases were dismissed
for reasons that do not reflect their own fault.” Assembly Sponsor’s Mem.,
supra, at 2; see Senate Introducer’s Mem., supra, at 2, 10. The Legislature
also intended to codify decisions correctly interpreting the savings
provision, including Andrea. See Senate Introducer’s Mem., supra, at 10.8
To give FAPA its full remedial effect, the Legislature directed that
the law’s substantive provisions take “effect immediately” and apply to
7C.P.L.R. 205-a omits the requirement contained in C.P.L.R. 205(a)
that the court identify the specific conduct constituting neglect in the
record. The Legislature found that this requirement, added to C.P.L.R.
205(a) in 2008, led to erroneous judicial interpretations in the mortgage
foreclosure context. See Senate Introducer’s Mem., supra, at 2, 10-11.
8 See also Marrero v. Crystal Nails, 114 A.D.3d 101, 109 (2d Dep’t
2018) (C.P.L.R. 205(a) unavailable where “plaintiffs failed to diligently
prosecute their claims in the prior action, failed to diligently respond to
discovery, and even failed to diligently seek vacatur of their default and
the ensuing dismissal of the prior action”).
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all foreclosure actions pending as of December 30, 2022. See FAPA § 10,
2022 N.Y. Laws at p. 4.
D This Foreclosure Action
Defendant-respondent Michael DeLuca purchased his home from
his parents, and he signed a note and mortgage secured by the home in
2004. In 2009, he fell behind on mortgage payments due to the financial
crisis. Plaintiff filed a foreclosure action in March 2011, accelerating the
loan. After the 2011 action was released from the settlement conference
phase in July 2013, Supreme Court directed plaintiff to file a motion for
a judgment of foreclosure and sale. Plaintiff failed to do so. (Record on
Appeal (R.) 35-60, 214-215, 218.)
In September 2015, Supreme Court dismissed the first foreclosure
action. The court explained that its orders “are not options, they are
requirements to be taken seriously by the parties.” (R. 228.) In April
2016, the court denied plaintiffs motion to vacate the dismissal finding
that plaintiff's conduct was “not law office failure” but was “tantamount
to abandonment, as well as disobedience.” (R. 231.) Plaintiff sought to
appeal the dismissal of the 2011 action years later in October 2019, but
then failed to timely perfect that appeal and it was deemed dismissed in
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July 2020. This Court denied plaintiffs out-of-time motion to extend the
time to perfect the appeal. (See R. 232, 239.)
In October 2020, almost ten years after accelerating the loan,
plaintiff filed a second foreclosure action. (R. 103-115.) In October 2021,
DeLuca moved to dismiss the complaint as time-barred. (R. 212-213.) In
December 2021, Supreme Court, Otsego County (Burns, J.), dismissed
the complaint, concluding that the statute of limitations had expired in
March 2017, six years after plaintiff accelerated the loan. (R. 6-7.)
In its opening brief filed in October 2022, plaintiff argued that this
action is timely under C.P.L.R. 205(a) because it was commenced within
six months of when its appeal of the first foreclosure action was deemed
dismissed. See Br. for Pl.-Appellant at 10-13. After FAPA took effect,
DeLuca filed his response brief, which argued that plaintiff does not
qualify for the savings provision because the prior foreclosure action was
dismissed due to neglect, as the newly enacted FAPA makes clear. See
Br. for Def.-Respondent at 15-21. In its reply, plaintiff responded that
FAPA violates the Takings Clause and the Due Process Clause to the
extent it applies retroactively to pending actions. See Reply Br. for Pl.-
Appellant (Reply Br.) at 8-15. Following notice of the constitutional
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challenge, on February 21, 2023, the Attorney General advised the Court
and the parties of her intent to intervene under Executive Law § 71 and
C.P.L.R. 1012(b) to defend the constitutionality of FAPA.
ARGUMENT
FAPA COMPORTS WITH THE STATE AND FEDERAL CONSTITUTIONS
In assessing plaintiff's constitutional challenges, FAPA receives “a
”
strong presumption of constitutionality, and plaintiff must “demon-
strat[e] the statute’s invalidity beyond a reasonable doubt.” LaValle v.
Hayden, 98 N.Y.2d 155, 161 (2002) (quotation marks omitted). Plaintiffs
fall far short of meeting this demanding standard, and this Court should
accordingly reject plaintiffs constitutional arguments.
A FAPA Comports with the Due Process Clause.
Plaintiffs argument that FAPA impinges its due process rights
fails. The mere fact that legislation has retroactive application does not,
in and of itself, “bring it into conflict with the guarantees of the Federal
Constitution.” Funkhouser v. J.B. Preston Co., 290 U.S. 163, 167-68
(1933). Legislation with retrospective effects can implicate substantive
due process if it “takes away or impairs vested rights acquired under exist-
14
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ing laws, or creates a new obligation, imposes a new duty, or attaches a
new disability, in respect to transactions or considerations already past.”
Landgraf v. USI Film Prods., 511 U.S. 244, 269 (1994) (quotation marks
omitted). Statutes with such retroactive effects are constitutional if the
“retroactive application of the legislation is itself justified by a rational
legislative purpose.” Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467
U.S. 717, 730 (1984). Here, FAPA comports with due process because it
does not impair any vested rights and the legislative history provides an
ample rational basis for FAPA’s retroactive scope.
1 The Legislature intended FAPA
to apply retroactively.
Plaintiff does not dispute that the Legislature intended for C.P.L.R.
205-a to apply to pending foreclosure actions, like the one here. See, e.g.,
Reply Br. at 16. In assessing “whether a statute should be given retro-
active effect” the Court of Appeals has indicated that courts should
9 The same rational basis review applies under the Due Process
Clause of the New York State Constitution. See American Economy Ins.
Co. v. State of New York, 30 N.Y.3d 136, 158 (2017); Matter of World
Trade Ctr. Lower Manhattan Disaster Site Litig., 30 N.Y.3d 377, 400
(2017).
15
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consider several factors, including whether (1) the Legislature has “made
a specific pronouncement about retroactive effect” or has “conveyed a
sense of immediacy” because it “acted swiftly” after a Court of Appeals
decision and “directed that the amendment was to take effect immedi-
ately”; and (2) “the purpose of the amendment was to clarify what the law
was always meant to do and say.” Matter of Gleason (Michael Vee, Ltd.),
96 N.Y.2d 117, 122 (2001). Where the factors establish that the
amendment is “remedial legislation,” then the law “should be given retro-
active effect in order to effectuate its beneficial purpose.” Id.
The plain text of FAPA, as well as the sponsors’ memoranda and
statements in floor debates, expressly demonstrates the Legislature’s
intent to apply it retroactively. FAPA § 10 makes “clear that this legisla-
tion will apply immediately, and will apply to” all pending actions.
Assembly Sponsor’s Mem., supra, at 2-3; see N.Y. Senate Debate on
S. 5473D, at 3025 (May 8, 2022) (“Senate Debate Tr.”) (statement of Sen.
Brian Kavan
Preview
UD U 0 IK DV INDEX NO. 604853/2015 NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 EXHIBIT 3 OUN IK 09 DV INDEX NO. 604853/2015 NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 05/03 2023 ON RD 4805 NYSCEF BOC. NO. 18 “RECEIVED NYSCEF: 03/30/2023 To be argued by: MARK 8S. GRUBE 15 minutes requested Supreme Court of the State of Pew Work Appellate Division — Third Department No. 534805 DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for the Registered Holder of Equifirst Mortgage Loan Trust 2004-2 Asset-Backed Certificates, Series 2004-2, Plaintiff-Appellant, Vv MICHAEL DELUCA, Defendant-Respondent, ATTORNEY GENERAL OF THE STATE OF NEW YORK, Intervenor-Respondent. (Caption continues inside front cover) BRIEF FOR INTERVENOR-RESPONDENT LETITIA JAMES Attorney General State of New York BARBARA D. UNDERWOOD Attorney for Intervenor-Respondent Solicitor General 28 Liberty Street ESTER MURDUKHAYEVA New York, New York 10005 Deputy Solicitor General (212) 416-8028 MARK 8S. GRUBE mark.grube@ag.ny.gov Assistant Solicitor General of Counsel Dated: March 30, 2023 Supreme Court, Otsego County — Index No. EF2020-623 INDEX NO. 604853/2015 NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 (Caption continues from front cover) -and- KEY BANK, NATIONAL ASSOCIATION, MIDLAND FUNDING LLC and “John Doe #1” through “John Doe #12” the last twelve names being fictitious and unknown to plaintiff, the persons or parties intended being the tenants, occupants, persons, or corporations, if any, having or claiming interest in or lien upon the premises described in the complaint, Defendants. UD U 0 OUN 09 INDEX NO. 604853/2015 NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 TABLE OF CONTENTS Page TABLE OF AUTHORITIES eee ecececeeeceeeeeeneeeeenseeseneaeneceseneeeeeteeneeee ease en eneeenes ll PRELIMINARY STATEMENT dee ceeececeeneneeeeeneneneceseeeceeeenseeeeeaeeesesesececeteteee QUESTION PRESENTED dete en ececeeeceeeenenseeeenesesesesesececesetseneeeeseeeeeeaeeeneeenenes STATEMENT OF THE CASE detec ee eeeeeeeeneeeeeneaececesesececeseteeeseenseeeeeeeseneeenenes A Mortgage Agreements and Foreclosure Litigation Following the 2007-2008 Financial Crisis dete eeececeeeeeeeeeseeneneeenes B New York’s Savings Clause debe ee eee eeececeeeceeeeeenseeeeseeesesesesececeneeee C The Foreclosure Abuse Prevention Act (FAPA) detec eeeeeneeeeenenes D This Foreclosure Action det eteeeeneeeeeseaececeseeececeteeseeeeeeseeeeneaenenegenes 12 ARGUMENT FAPA COMPORTS WITH THE STATE AND FEDERAL CONSTITUTIONS seeeeeee 14 A. FAPA Comports with the Due Process Clause a et eeeeeeeeeeeneeeees 14 1 The Legislature intended FAPA to apply LECVOACTIVELY. oo. eeeeeceeeeeeeeeeeeceteeeeneeeeeceaeeeeaeeeeeeeeeenaeess 15 2 FAPA does not impair any vested rights...... deeeeeees 18 3 FAPA’s retroactive scope is rational seteeeeeeeeeeseeeneeeeeneeeeenes 21 B. FAPA Comports with the Takings Clause se eeeeeeeee deeeeeees 23 CONCLUSION dee ec ee eeeeeeneeeeeeenenececeeeeneneeensee eee eneeeeeeeeeeeeeenseeeeeaeneseneteeesereee 27 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 TABLE OF AUTHORITIES Cases Page(s) American Economy Ins. Co. v. State of New York, 30 N.Y.3d 136 (2017) det eeeeeenenenecenenececeteeeeeeeenseeeeneaesesenesecesereteeeees 15, 21-22 Andrea v. Arnone, Hedin, Casker, Kennedy & Drake, Architects & Landscape Architects, P.C. (Habiterra Assoc.), 5 N.Y.3d 514 (2005) eben ecececeneceeeeeeneeeeeenecesenececeteeeseeeeeteeeeeenes 7-8, 18, 24 Bank of N.Y. Mellon v. Slavin, 156 A.D.3d 1073 (38d Dep’t 2017) dee ceeececeeeeneeeeeeeeneeesenececeteeeteeeeeteeeeeenes Bank of N.Y. v. Mohammed, 130 A.D.3d 1419 (38d Dep’t 2015) sevens sevens sevens seseeeeeeee Bank of N.Y. v. Treco, 240 F.3d 148 (2d Cir. 2001) dee eeeeeceeeeneeeeenenenecesenececereeeseeeeeteeeeaeaeseeesenes 23 Brothers v. Florence, 95 N.Y.2d 290 (2000) dee eteeeeneeenenececeseenceeeesseeeeeaeseeeceseeeseeeenseeeeeeenenenenes 20 Chase Secs. Corp. v. Donaldson, 325 U.S. 304 (1945) eben ecececeeneeceeneeeeeeenenecenececeseteeeeeeeseeeeeeeneeeseseterereeeee 22 Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211 (1986) debe ececeneenceceeneeeeeeaeneneceseteceseseseseesseeeeseaesececereterereeene 26 Deutsche Bank Natl. Trust Co. v. Gouin, 194 A.D.3d 479 (1st Dep’t 2021) dec eceeeeneeeeeneneneceneeeceeeeeseeeeneeaeneaesececeteeee East Fork Funding LLC v. U.S. Bank, N.A., No. 20-ev-3404 (E.D.N.Y. Mar. 23, 2023) dee eeeeeenee eee eeenececeteeeseeeenteeeeneee 22 Freedom Mtge. Corp. v. Engel, 37 N.Y.3d 1 (2021) dace ceeeeeceeneneeee sence eceneneceeeenseeeeneeeesenesececeseeseeeeeeseeneneee 4-5 Funkhouser v. J.B. Preston Co., 290 U.S. 163 (1933) eben ecececeeneeceeneeeeeeenenecenececeseteeeeeeeseeeeeeeneeeseseterereeeee 14 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 Cases Page(s) George v. Mt. Sinai Hosp., 47 N.Y.2d 170 (1979) det eeeeeeeea ence ener ececeseeeeeeneneeeeseseneceseneceseteenteee seen enenenenes GMAT Legal Title Trust 2014-1 v. Kator, 213 A.D.3d 915 (2d Dep’t 2023) det eteeeeneeeeeseaececeseeececeteeseeeeeeseeeeneaenenegenes 18 John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544 (1979) debt eeeeaenecececeeneeceeneeeeaeaenececeseteeeeeenseeeeeaeseseseneeesereee 26 Landgraf v. USI Film Prods., 511 U.S. 244 (1994) dee eeeececeeeeeeeeneneeeeenececesetececeteseeeeneaeeeseaesecesereteee 15, 18 LaValle v. Hayden, 98 N.Y.2d 155 (2002) debt eeeeaenecececeeneeceeneeeeaeaenececeseteeeeeenseeeeeaeseseseneeesereee 14 Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005) sete ence eceeeeeeeeneneeeeenesesesesenececeseseceseensereeeseteeeneseees 23-24 Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) eee eeececeeecneeeeeneeeeeneneneeesenececeteeeseenenseeeeaeeeseseseteeeeeteee 23 Marrero v. Crystal Nails, 114 A.D.3d 101 (2d Dep’t 2013) det eteeeeneeeeeseaececeseeececeteeseeeeeeseeeeneaenenegenes 11 Matter of Gleason (Michael Vee, Ltd.), 96 N.Y.2d 117 (2001) eben ee ee ee enececeeneeeeeneneeaeseseceseseteeeeeenseeeeaeaeseseseneeesereee 16 Matter of Regina Metropolitan Co., LLC v. New York State Division of Housing and Community Renewal, 35 N.Y.3d 332 (2020) eben eceeeeenececeeneeeeeneneeeeeaenececeseteeeeeeeaeeeseneneeeeeteeesetees 19 Matter of Winston v. Freshwater Wetlands Appeals Bd., 224 A.D.2d 160 (2d Dep’t 1996) det eeeeeeeee ene en enececeteeeceeeenseeeeneeeesesenesesenenes Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig., 30 N.Y.3d 377 (2017) eben ee ee ee enececeeneeeeeneneeesenenececeseteeeeeeseaeeeeeaeseeeeeteeereeee® 15 Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978) dee enececeeeeeeeeneneeeseseneneceseneceeeeeeeeeee ease eneeesenecesereeereeeee 25 iii UD U 0 OUN 09 INDEX NO. 604853/2015 NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 Cases Page(s) Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) eee eeececeeecneeeeeneeeeeneneneeesenececeteeeseenenseeeeaeeeseseseteeeeeteee 23 Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984) debe n ee ececeeneeceeneneeeaeeneneceseeececeseseeeeneeeesenesesecereeeee 15, 21 People v. Allen, 198 A.D.3d 531 (1st Dep’t 2021) dec eceeeeneeeeeenececeeeeeceeeenseeeeeaeseseseneceeereee 19 Tahoe-Sierra Preserv. Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002) eee eeececeeecneeeeeneeeeeneneneeesenececeteeeseenenseeeeaeeeseseseteeeeeteee 24 United States Fid. & Guar. Co. v. Smith Co., 46 N.Y.2d 498 (1979) det eeeeeeeea ence ener ececeseeeeeeneneeeeseseneceseneceseteenteee seen enenenenes Wells Fargo Bank, N.A. v. Eitani, 148 A.D.3d 193 (2nd Dep’t 2017) dee eceeeeeeeeeeneeeeeneaeeesesesececeseeeeeeeteeeseeees 6,8 Wells Fargo Bank N.A. v. Kehres, 199 A.D.3d 869 (2d Dep’t 2021) det eeeeeeneeeeeneaececeeenececeseeseeeeeeseeeeeeaeeeneeenenes Constitutions U.S. Const. amend. V seen ence eceeeeeeeesenseeeeneeeseceaesececesetecesereseeeeneeeeeeaesesesenenes 23 Laws Ch. 821, 2022 N.Y. Laws, p. 1 dee eceeeeneeeeeeeeeneeeseneeeseneneeeees 9-10, 12, 16-17, 25 C.P.L.R. 205 seeeeeee sevens sevens sevens sevens seceeeneeeee 1, 6, 10-11 205-a .10-11 213 seeeeee seeeee seeeeeneeee General Obligations Law § 17-105 wees ec ececeeeeneeeeeneaeneeeeenececeseteseseeeseseeeeeeee 24 lv INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 Miscellaneous Authorities Page(s) Bill Jacket for ch. 821 (2022) Assembly Sponsor’s Mem. .........::ceccesceeceeseeeeeeteeseeeeeeee 9-11, 16-17, 21-22 Letter from New Yorkers for Responsible Lending, to Kathy Hochul, Governor (May 9, 2022) sees teeeee dececeeeeeeeeeeeeeeeeeee 5-6 Senate Introducer’s Mem. .... 9-11, 17, 21-22 Fannie Mae, Fannie Mae Legal Documents (updated July 2021), https://singlefamily.fanniemae.com/fannie-mae-legal- documents seeeeeeeee teeeee teeeee teeeee deeeeeeenee Fannie Mae, Security Instruments, New York Standard Form (No. 3033) (July 2021), https://singlefamily.fanniemae.com/ media/document/docx/legal-documents/form-3033 seseeeeeee seeeeeee 4-5 Lawrence K. Marks, 2015 Report of the Chief Administrator of the Courts (2015), https://ww2.nycourts.gov/sites/default/ files/document/files/2018-06/2015ForeclosureReport.pdf .. deeeeeeenee N.Y. Assembly Debate on A. 7737B (Mar. 23, 2022) deen eeeceeeeeeeeeeeeeees 16-17 N.Y. Senate Debate on S. 5473D (May 8, 2022) deen ec ececeeeeeeeeeeeseeeeeeneeeeenes 16 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 PRELIMINARY STATEMENT New York law has long afforded certain litigants the ability to refile a timely commenced action within six months of a dismissal without prejudice, even if the refiling would otherwise be untimely. See C.P.L.R. 205(a). Notably, the statute has always precluded refiling in cases where the plaintiff neglected to prosecute its first action. Although this “savings” statute was intended for diligent litigants, several appellate courts mistakenly allowed plaintiffs in foreclosure cases to refile dismissed actions notwithstanding those plaintiffs’ failures to pursue their original claims. In response to these erroneous holdings and other abuses in foreclosure litigation, the Legislature enacted the Foreclosure Abuse Prevention Act (FAPA). As relevant here, FAPA clarifies that lenders whose initial actions are dismissed for, among other reasons, violation of court rules, failure to comply with court orders, or for nonappearance at mandatory conferences, are not entitled to a grace period to file a new action after the statute of limitations has run. Plaintiff-appellant Deutsche Bank National Trust Company asserts that the retroactive application of FAPA to this pending foreclosure claim violates provisions of the federal and state Constitutions. Pursuant to INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 Executive Law § 71 and C.P.L.R. 1012(b), the Attorney General now intervenes in this action to defend the constitutionality of FAPA’s applica- tion to this and other pending matters. First, FAPA’s retroactive application does not violate the Due Process Clause. The Legislature plainly intended to give FAPA retroac- tive effect to effectuate its remedial purpose and restore the longstanding law governing the application of C.P.L.R. 205(a)’s savings provision to mortgage foreclosure claims. Plaintiff has no vested right in pursuing successive mortgage foreclosure actions after neglecting a prior action and allowing the statute of limitations to run. And even if FAPA did disturb a vested right, it would still withstand constitutional scrutiny because it has a rational basis: ensuring that lenders cannot manipulate 1 To date, the Attorney General has received over twenty notices of constitutional challenges to FAPA in trial and appellate courts. In addi- tion to this case, the Attorney General has intervened in U.S. Bank National Association v. Corcuera, No. 2020-06138 (2d Dep’t) and U.S. Bank National Association v. Simon, No. 2020-09391 (2d Dep't). Although the Attorney General has declined to intervene in other cases, she has made clear that no inference adverse to the State should be drawn from those decisions. The Attorney General’s position supporting the constitu- tionality of the law will be reflected in this brief and the briefs filed in Corcuera and Simon. INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 the statute of limitations and thereby undermine the public interest in finality and repose. Second, FAPA’s retroactive application does not implicate the Takings Clause. FAPA does not interfere with any vested property rights; it simply clarifies the law governing when a mortgage foreclosure plaintiff may invoke the savings provision. And even if FAPA did impair a vested property right, plaintiff has not shown either a physical taking or a regulatory taking. QUESTION PRESENTED Whether the retroactive application of the Foreclosure Abuse Prevention Act’s amendments to C.P.L.R. 205(a) violates due process or the Takings Clause. INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 STATEMENT OF THE CASE A. Mortgage Agreements and Foreclosure Litigation Following the 2007-2008 Financial Crisis A loan to finance the purchase of residential property is generally memorialized in two instruments. First, the borrower executes a promis- sory note, in which the borrower agrees to be personally responsible for repaying the loan. Second, the borrower executes a security instrument, or mortgage, in which the noteholder receives a security interest in the residential property. Borrowers generally agree to repay the loan in installments over time, often a fifteen-to-thirty-year period, with interest. See Freedom Mige. Corp. v. Engel, 37 N.Y.3d 1, 21 (2021).? In the event of a default, such as a failure to make an installment payment, a common provision known as an “acceleration clause” gives the lender the right, but not the obligation, to require immediate payment of the remaining balance owed under the promissory note and the mortgage. A lender may invoke an acceleration clause by commencing a foreclosure 2 See also Fannie Mae, Security Instruments, New York Standard Form (No. 3033), § 1 (July 2021). See generally Fannie Mae, Fannie Mae Legal Documents (updated July 2021). (For sources available online, full URLs appear in the Table of Authorities. All URLs were last visited on March 30, 2023.) INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 action, an equitable remedy permitting the noteholder to take possession of the real property securing the debt. Like other actions for breach of contract, actions arising from the alleged breach of a mortgage agreement are subject to a six-year statute of limitations. See C.P.L.R. 213(2), (4); see also Engel, 37 N.Y.3d at 19. Before a lender elects to accelerate a loan, a six-year statute of limitations runs anew with respect to each missed installment payment. After a lender elects to accelerate a loan, the six-year statute of limitations runs on the entire amount due under the note and mortgage as of the date of acceleration.4 In the years following the 2007-2008 financial crisis, New York courts were flooded with residential foreclosure actions, most of which were default proceedings without any involvement by the defendant homeowners. The plaintiff lenders in many cases “relied on documents ‘robo-signed’ by bank representatives who claimed to have personally 3 See Engel, 37 N.Y.3d at 21; see also Letter from New Yorkers for Responsible Lending, to Kathy Hochul, Governor 1-3 (May 9, 2022), in Bill Jacket for ch. 821 (2022); Fannie Mae, New York Standard Form, supra, § 26. 4 See Engel, 37 N.Y.2d at 21-22 & n.3; Letter from New Yorkers for Responsible Lending, supra, at 1. INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 reviewed thousands of documents in implausibly short periods of time.” Lawrence K. Marks, 2015 Report of the Chief Administrator of the Courts 6 (2015) (pursuant to L. 2009, ch. 507). Because of inadequate docu- mentation “plaintiffs were unable to proceed with their cases.” Id. As a result, many lenders subjected borrowers to multiple, successive foreclosure actions. See Letter from New Yorkers for Responsible Lending, supra, at 3. B New York’s Savings Clause In seventeenth century England, the common law allowed a party, “whose action had abated for matter of form, a reasonable time within which to journey to court to sue out a writ.” Wells Fargo Bank, N.A. v. Eitani, 148 A.D.3d 193, 200 (2nd Dep’t 2017) (quotation marks omitted). This practice has existed in New York law in some form since at least 1788. See id. Since the C.P.L.R. was enacted in 1962, it has provided that a plaintiff may timely commence a new action if it is filed within six months of a timely action that was not terminated for, among other reasons, “a dismissal of the complaint for neglect to prosecute the action.” C.P.LR. 205(a). INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 This savings period “serves the salutary purpose of preventing a Statute of Limitations from barring recovery where the action, at first timely commenced, has been dismissed due to a technical defect which can be remedied in a new action.” United States Fid. & Guar. Co. v. Smith Co., 46 N.Y.2d 498, 505 (1979). It ensures that litigants are afforded “a genuine bite at the apple,” Matter of Winston v. Freshwater Wetlands Appeals Bd., 224 A.D.2d 160, 164 (2d Dep’t 1996), by providing “a second opportunity to the claimant who has failed the first time around because of some error pertaining neither to the claimant’s willingness to prosecute in a timely fashion nor to the merits of the underlying claim,” George v. Mt. Sinai Hosp., 47 N.Y.2d 170, 178-79 (1979). Consistent with the underlying purpose of the savings period, the Court of Appeals has not limited the scope of the neglect exception to dismissals for want of prosecution under C.P.L.R. 3216. Rather, it applies “whenever neglect to prosecute is in fact the basis for dismissal.” Andrea v. Arnone, Hedin, Casker, Kennedy & Drake, Architects & Landscape Architects, P.C. (Habiterra Assoc.), 5 N.Y.3d 514, 520 (2005). For example, a litigant whose action is dismissed for failure to comply with discovery deadlines and scheduling orders is not entitled “to start all over again, INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 after the statute of limitations has expired.” Id. at 521. Despite this precedent, in the years following the onslaught of foreclosure litigation in 2007-2008, the Departments of the Appellate Division developed laxer rules for mortgage foreclosure plaintiffs, allowing them to pursue new actions, even when they neglected their prior action. For instance, in Hitani, plaintiff filed a foreclosure action but then failed to prosecute the action for approximately eight years after defend- ant defaulted. An administrative judge clearing the docket dismissed the action as abandoned pursuant to C.P.L.R. 3215(c), which provides for dismissal when plaintiff “fails to take proceedings for the entry of judg- ment within one year after the default.” Despite the record showing years of inactivity in the initial foreclosure action, the Second Department allowed the plaintiff to invoke the savings provision and pursue another action, concluding that the prior dismissal pursuant to C.P.L.R. 3215(c) did not preclude the application of C.P.L.R. 205(a)’s savings period. See Eitani, 148 A.D.3d at 195-96.> 5 See also Deutsche Bank Natl. Trust Co. v. Gouin, 194 A.D.3d 479, 481 (1st Dep’t 2021) (permitting use of C.P.L.R. 205(a)); Wells Fargo Bank N.A. v. Kehres, 199 A.D.3d 869, 871 (2d Dep’t 2021) (same). 8 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 And in another case, plaintiff not only failed to act for years after defendant’s default, but also failed to appear at a status conference, and then failed to appear again at a conference on its motion to vacate the dismissal of the complaint for failing to appear at the prior conference. This Court affirmed dismissal of the initial foreclosure action based on plaintiff's “absence of a reasonable excuse” for failing to appear at confer- ences. See Bank of N.Y. v. Mohammed, 130 A.D.3d 1419, 1420 (3d Dep’t 2015). But despite this extensive record of neglect, the Court later concluded that plaintiff could avail itself of C.P.L.R.’s 205(a)’s grace period and try again in a successive foreclosure action. Bank of N.Y. Mellon v. Slavin, 156 A.D.3d 1073, 1074 (3d Dep’t 2017). Cc The Foreclosure Abuse Prevention Act (FAPA) The Legislature passed FAPA in May 2022, and it was signed into law by Governor Kathy Hochul in December 2022. See Ch. 821, 2022 N.Y. Laws, p. 1. The purpose of FAPA is to address “ongoing problem[s] with abuses of the judicial foreclosure process.” Assembly Sponsor’s Mem. at 1, in Bill Jacket, supra; accord Senate Introducer’s Mem. at 1, in Bill Jacket, supra. The Legislature found that these problems were “exacerbated by recent court decisions which, contrary to the intent of the legislature” 9 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 gave lenders opportunities to “manipulate statutes of limitation to their advantage” at the expense of the “finality and repose” provided by the statute of limitations. Assembly Sponsor’s Mem., supra, at 1; see Senate Introducer’s Mem., supra, at 1. Two of FAPA’s substantive provisions are relevant here. First, FAPA § 5, codified at C.P.L.R. 205(c), provides that the savings period applicable to mortgage foreclosure claims is covered by the specific provisions contained in C.P.L.R. 205-a, described below, rather than the general provisions contained in C.P.L.R. 205(a). C.P.L.R. 205(c). The Legislature removed foreclosure actions from the scope of C.P.L.R. 205(a) because of “extraordinary abuse and judicial misinterpretation” of that provision as applied to foreclosure actions.® See Senate Introducer’s Mem., supra, at 10. Second, FAPA § 6, codified at C.P.L.R. 205-a, provides a new savings provision for foreclosure actions. The provision is modeled on C.P.L.R. 205(a), but provides more specific language clarifying the 6 The Legislature specifically identified the decisions in Slavin, Eitani, and Gouin as inconsistent with legislative intent. See Senate Introducer’s Mem., supra, at 10. 10 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 meaning of neglect and specifying the types of dismissals that constitute neglect, including dismissal for violation of court rules, failure to comply with scheduling orders, and for nonappearance.’ C.P.L.R. 205-a responds to “judicial decisions that have been contrary to the spirit of th[e] savings provision” by being “overly indulgent of foreclosure plaintiffs whose cases have been dismissed for various forms of neglect” and clarifies that the savings provision is “for diligent plaintiffs whose cases were dismissed for reasons that do not reflect their own fault.” Assembly Sponsor’s Mem., supra, at 2; see Senate Introducer’s Mem., supra, at 2, 10. The Legislature also intended to codify decisions correctly interpreting the savings provision, including Andrea. See Senate Introducer’s Mem., supra, at 10.8 To give FAPA its full remedial effect, the Legislature directed that the law’s substantive provisions take “effect immediately” and apply to 7C.P.L.R. 205-a omits the requirement contained in C.P.L.R. 205(a) that the court identify the specific conduct constituting neglect in the record. The Legislature found that this requirement, added to C.P.L.R. 205(a) in 2008, led to erroneous judicial interpretations in the mortgage foreclosure context. See Senate Introducer’s Mem., supra, at 2, 10-11. 8 See also Marrero v. Crystal Nails, 114 A.D.3d 101, 109 (2d Dep’t 2018) (C.P.L.R. 205(a) unavailable where “plaintiffs failed to diligently prosecute their claims in the prior action, failed to diligently respond to discovery, and even failed to diligently seek vacatur of their default and the ensuing dismissal of the prior action”). 11 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 all foreclosure actions pending as of December 30, 2022. See FAPA § 10, 2022 N.Y. Laws at p. 4. D This Foreclosure Action Defendant-respondent Michael DeLuca purchased his home from his parents, and he signed a note and mortgage secured by the home in 2004. In 2009, he fell behind on mortgage payments due to the financial crisis. Plaintiff filed a foreclosure action in March 2011, accelerating the loan. After the 2011 action was released from the settlement conference phase in July 2013, Supreme Court directed plaintiff to file a motion for a judgment of foreclosure and sale. Plaintiff failed to do so. (Record on Appeal (R.) 35-60, 214-215, 218.) In September 2015, Supreme Court dismissed the first foreclosure action. The court explained that its orders “are not options, they are requirements to be taken seriously by the parties.” (R. 228.) In April 2016, the court denied plaintiffs motion to vacate the dismissal finding that plaintiff's conduct was “not law office failure” but was “tantamount to abandonment, as well as disobedience.” (R. 231.) Plaintiff sought to appeal the dismissal of the 2011 action years later in October 2019, but then failed to timely perfect that appeal and it was deemed dismissed in 12 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 July 2020. This Court denied plaintiffs out-of-time motion to extend the time to perfect the appeal. (See R. 232, 239.) In October 2020, almost ten years after accelerating the loan, plaintiff filed a second foreclosure action. (R. 103-115.) In October 2021, DeLuca moved to dismiss the complaint as time-barred. (R. 212-213.) In December 2021, Supreme Court, Otsego County (Burns, J.), dismissed the complaint, concluding that the statute of limitations had expired in March 2017, six years after plaintiff accelerated the loan. (R. 6-7.) In its opening brief filed in October 2022, plaintiff argued that this action is timely under C.P.L.R. 205(a) because it was commenced within six months of when its appeal of the first foreclosure action was deemed dismissed. See Br. for Pl.-Appellant at 10-13. After FAPA took effect, DeLuca filed his response brief, which argued that plaintiff does not qualify for the savings provision because the prior foreclosure action was dismissed due to neglect, as the newly enacted FAPA makes clear. See Br. for Def.-Respondent at 15-21. In its reply, plaintiff responded that FAPA violates the Takings Clause and the Due Process Clause to the extent it applies retroactively to pending actions. See Reply Br. for Pl.- Appellant (Reply Br.) at 8-15. Following notice of the constitutional 13 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 challenge, on February 21, 2023, the Attorney General advised the Court and the parties of her intent to intervene under Executive Law § 71 and C.P.L.R. 1012(b) to defend the constitutionality of FAPA. ARGUMENT FAPA COMPORTS WITH THE STATE AND FEDERAL CONSTITUTIONS In assessing plaintiff's constitutional challenges, FAPA receives “a ” strong presumption of constitutionality, and plaintiff must “demon- strat[e] the statute’s invalidity beyond a reasonable doubt.” LaValle v. Hayden, 98 N.Y.2d 155, 161 (2002) (quotation marks omitted). Plaintiffs fall far short of meeting this demanding standard, and this Court should accordingly reject plaintiffs constitutional arguments. A FAPA Comports with the Due Process Clause. Plaintiffs argument that FAPA impinges its due process rights fails. The mere fact that legislation has retroactive application does not, in and of itself, “bring it into conflict with the guarantees of the Federal Constitution.” Funkhouser v. J.B. Preston Co., 290 U.S. 163, 167-68 (1933). Legislation with retrospective effects can implicate substantive due process if it “takes away or impairs vested rights acquired under exist- 14 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 ing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past.” Landgraf v. USI Film Prods., 511 U.S. 244, 269 (1994) (quotation marks omitted). Statutes with such retroactive effects are constitutional if the “retroactive application of the legislation is itself justified by a rational legislative purpose.” Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 730 (1984). Here, FAPA comports with due process because it does not impair any vested rights and the legislative history provides an ample rational basis for FAPA’s retroactive scope. 1 The Legislature intended FAPA to apply retroactively. Plaintiff does not dispute that the Legislature intended for C.P.L.R. 205-a to apply to pending foreclosure actions, like the one here. See, e.g., Reply Br. at 16. In assessing “whether a statute should be given retro- active effect” the Court of Appeals has indicated that courts should 9 The same rational basis review applies under the Due Process Clause of the New York State Constitution. See American Economy Ins. Co. v. State of New York, 30 N.Y.3d 136, 158 (2017); Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig., 30 N.Y.3d 377, 400 (2017). 15 INDEX NO. 604853/2015 FILED: SUFFOLK COUNTY CLERK 05/0372023 09:54 PM NYSCEF DOC. NO. 537 RECEIVED NYSCEF: 05/03/2023 consider several factors, including whether (1) the Legislature has “made a specific pronouncement about retroactive effect” or has “conveyed a sense of immediacy” because it “acted swiftly” after a Court of Appeals decision and “directed that the amendment was to take effect immedi- ately”; and (2) “the purpose of the amendment was to clarify what the law was always meant to do and say.” Matter of Gleason (Michael Vee, Ltd.), 96 N.Y.2d 117, 122 (2001). Where the factors establish that the amendment is “remedial legislation,” then the law “should be given retro- active effect in order to effectuate its beneficial purpose.” Id. The plain text of FAPA, as well as the sponsors’ memoranda and statements in floor debates, expressly demonstrates the Legislature’s intent to apply it retroactively. FAPA § 10 makes “clear that this legisla- tion will apply immediately, and will apply to” all pending actions. Assembly Sponsor’s Mem., supra, at 2-3; see N.Y. Senate Debate on S. 5473D, at 3025 (May 8, 2022) (“Senate Debate Tr.”) (statement of Sen. Brian Kavan