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September 23, 2024

Constitutionality of Shortened Time Limits on New York Foreclosures Still Unresolved

On September 12, 2024, New York’s highest court dismissed an appeal challenging the constitutionality of the retroactive application of the Foreclosure Abuse Prevention Act (“FAPA”), a law that amended certain New York rules to strictly cabin the time limits for commencing mortgage foreclosures.  The Court of Appeals, on its own motion, decided that there was no constitutional issue before it.  See MTGLQ Invs., L.P. v. Singh, 2024 NY Slip Op. 74046 (Sep 12, 2024).  The question of FAPA’s constitutionality remains unresolved.

The appellant in MTGLQ was the plaintiff in a residential mortgage foreclosure action whose summary judgment victory in the trial court was reversed by the appellate division, and its complaint dismissed as untimely, based on FAPA.  FAPA’s constitutionality was not at issue at the appellate division in MTGLQ, because the law did not become effective until December 30, 2022, after that appeal was fully submitted.  Thus, the constitutionality of applying FAPA retroactively was raised for the first time in the plaintiff’s appeal to the Court of Appeals.

In previous posts we noted that appellate guidance was wanting, as both state and federal trial courts were coming to contrary views on the extent of FAPA’s retroactivity.

So far, none of New York’s four intermediate appellate divisions have squarely addressed the constitutionality of FAPA’s retroactive application.

The Third Department has avoided the issue because in the FAPA constitutionality appeals it has decided so far, the outcome was the same under the new law or the old.  See Deutsche Bank Nat’l Tr. Co. v. Deluca, 225 A.D.3d 91 (3d Dep’t Feb. 29, 2024); Wells v. Welch, 223 A.D.3d 993 (3d Dep’t Jan 11, 2024).

The First Department has done the same, see U.S. Bank Tr., N.A. v. Chung, 216 A.D.3d 418 (1st Dep’t May 2, 2023), or has not needed to determine constitutionality because the issue was not preserved.  See Genovese v. Nationstar Mortg. LLC, 223 A.D.3d 37 (1st Dep’t Dec. 19, 2023) (avoiding constitutional arguments because defendant failed to notify the Attorney General); U.S. Bank, N.A. v. Fox, (1st Dep’t May 4, 2023) (applying FAPA-amended statute without discussion of retroactivity).

The Second Department, by far the most active of the four departments in residential foreclosures, has continued to make a practice of remitting appeals in which the constitutionality of FAPA is raised back to the trial court whenever the issue had not been briefed and argued there.  See 2078 Mgmt, LLC v. US Bank Tr. N.A., 229 A.D. 3d 662 (2d Dep’t July 24, 2024); Maneri v. Residential Funding Co., LLC, 227 A.D.3d 796 (2d Dep’t May 8, 2024); MTGLQ Investors, L.P. v. Lila, 226 A.D.3d 889 (2d Dep’t Apr. 17, 2024); Sarkar v. Deutsche Bank Tr. Co. Americas, 225 A.D.3d 641 (2d Dep’t Mar. 6, 2024); HSBC Bank USA v. Gifford, 224 A.D.3d 447 (1st Dep’t Feb. 8, 2024); US Bank Nat’l Ass’n v. Medianik, 223 A.D.3d 935 (2d Dep’t Jan. 31, 2024); Wells Fargo v. Cafasso, 223 A.D.3d 695 (2d Dep’t Jan. 10, 2024); Bank of N.Y. Mellon v. MS Global Grp., LLC, 222 A.D.3d 821 (2d Dep’t Dec. 20, 2023); Ronen, LLC v. Hanipoly, 221 A.D.3d 741 (2d Dep’t Nov. 8, 2023); Johnson v. Cascade Funding, 220 A.D.3d 929 (2d Dep’t Oct. 25, 2023); Deutsche Bank Nat’l Tr. Co. v. Wong, 218 A.D.3d 742 (2d Dep’t July 26, 2023); U.S. Bank Nat’l Ass’n v. Santos, 218 A.D.3d 827 (2d Dep’t July 26, 2023); U.S. Bank, N.A. v. Simon, 216 A.D.3d 1041 (2d Dep’t May 17, 2023). Some appeals are pending before the Second Department with the issue of FAPA’s constitutionalist fully briefed.  See e.g. U.S. Bank etc. v. Boreshesky, Case No. 2023-11551 (2d Dep’t) (fully briefed July 10, 2024); Wells Fargo Bank, N.A. etc. v. Khorram, Case No. 2024-00177 (2d Dep’t) (fully briefed May 24, 2024); U.S. Bank etc. v. Onuoha, Case No. 2019-13088 (2d Dep’t) (renewal fully briefed July 21, 2023).  Whether one of these cases will bring the issue to the Second Department, and ultimately to the Court of Appeals, for a final resolution is yet to be seen. So far, the Second Department has not issued a decision determining the constitutionality of FAPA.

The New York Attorney General’s Office, whose view must be solicited when the constitutionality of a New York law is at issue, has intervened or filed amicus briefs in four state and two federal foreclosure actions, arguing in favor of FAPA’s constitutionality. See Brief for Intervenor-Appellant, U.S. Bank N.A. etc. v. Lynch, Case No. Cv-23-1194 (3d Dep’t Apr. 3, 2024); Brief for Intervenor, East Fork Funding LLC v. U.S. Bank, Nat’l Ass’n, No. 23-659, 2023 WL 7320546 (2d Cir. Oct. 31, 2023); Brief for State of New York as Amicus Curiae in Support of Appellees, CIT Bank, N.A. v. Zisman, Nos. 20-1314(L), 2023 WL 4584931 (2d Cir. July 12, 2023); Brief for Intervenor-Respondent, U.S. Bank N.A. etc. v. Corcuera, Case No. 2020-06138 (2d Dep’t Apr. 7, 2023); Brief for Intervenor-Respondent, Deutsche Bank Nat’l Tr. Co. v. DeLuca, 2023 WL 9005563 (3d Dep’t Mar. 30, 2023); Brief for Intervenor-Respondent, U.S. Bank N.A. v. Simon, Case No. 2020-09391 (2d Dep’t Mar. 27, 2023).  In two of the six cases, decisions remain pending.  Lynch (fully briefed May 13, 2024); East Fork Funding LLC (argued Feb. 29, 2024).  None of the other four resulted in a decision that decided FAPA’s constitutionality.  Zisman, 2024 WL 763392 (2d Cir. Feb. 26, 2024) (affirming dismissal of foreclosure action as time-barred without addressing retroactivity); Corcuera, 217 A.D.3d 896 (2d Dep’t June 21, 2023) (“the plaintiff was not entitled to the benefits of CPLR 205(a), and we need not reach the question of whether the more stringent requirements of the newly-enacted CPLR 205-a are applicable to this case”); DeLuca, 225 A.D.3d 91 (3d Dep’t Feb. 29, 2024) (“In light of our determination that plaintiff was not entitled to the six-month grace period under either CPLR 205(a) or CPLR 205-a, we need not, and do not, address the parties’ arguments regarding the retroactive application of CPLR 205-a and the constitutionality of such an application.”); Simon, 216 A.D.3d 1041 (2d Dep’t Mar. 27, 2023) (reversing dismissal of action as time-barred and remitting for consideration of constitutionality of FAPA).

With this month’s dismissal, “sua sponte, upon the ground that no substantial constitutional question is directly involved.” the first appeal to have brought the issue before the Court of Appeals ends with the question of FAPA’s constitutionality unanswered.

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