Adam Leitman Bailey, P.C. Wins a Case of First Impression Under FAPA, Protecting its Client’s Mortgage in a Murky Legal Climate for Lender’s Rights

Adam Leitman Bailey, P.C. was retained by a lender to navigate through the ever-changing foreclosure laws and save the lender’s ability to foreclose.

The lender’s foreclosure action was commenced in 2017. The lender moved for summary judgment, and the borrower cross-moved to dismiss, arguing that, per the Second Department’s holding in Bank of America, N.A. v. Kessler, 202 A.D.3d 10 (2d Dept. 2021) (hereinafter, “Kessler”), the 90 Day Notices served by the lender violated RPAPL § 1304 for containing additional disclosures outside of the statute. Since at the time the motion was decided Kessler was not yet overturned by the Court of Appeals, the Court was constrained to grant the borrower’s cross-motion and dismiss the case.

As the action commenced in 2017 and for other reasons, the lender was up against the statute of limitations on its right to foreclose the mortgage. That is when Adam Leitman Bailey, P.C. stepped in. To protect the lender’s rights, Adam Leitman Bailey, P.C. commenced a second foreclosure action in 2023 just before the expiration of the statute of limitations.

By Opinion dated February 14, 2023, however, the Court of Appeals overturned Kessler, holding that “accurate statements that further the underlying statutory purpose of providing information to borrowers that is or may become relevant to avoiding foreclosure do not constitute an ‘other notice’…” and are permitted. Bank of America, N.A. v. Kessler, 39 N.Y.3d 317 (2023).

Adam Leitman Bailey, P.C., therefore, moved to renew its motion for summary judgment in the 2017 action, arguing that, as was the case in Kessler, the only additional information contained in the 90 Day Notice sent to the borrower was information specifically intended by the Fair Debt Collection Practices Act to protect borrowers, to wit, a disclosure on the bottom of the 90 Day Notice that the communication is coming from a debt collector and that if the borrower is in bankruptcy or received a bankruptcy discharge, the notice is not an attempt to collect the debt.

Given that the 90 Day Notice in Kessler was virtually identical to those served in this action, Adam Leitman Bailey, P.C.’s motion was likely to be granted. Undeterred though, the borrower then cross-moved to dismiss on different grounds: that RPAPL § 1301(3) as amended by the Foreclosure Abuse Prevention Act (“FAPA”) served to automatically dismiss the first foreclosure action simply because the lender sought to protect its rights by commencing a second action.

RPAPL § 1301(3) states as follows:

While the action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, including an action to foreclose the mortgage, without leave of the court in which the former action was brought. The procurement of such leave shall be a condition precedent to the commencement of such other action and the failure to procure such leave shall be a defense to such other action. For purposes of this subdivision, in the event such other action is commenced without leave of the court, the former action shall be deemed discontinued upon the commencement of the other action, unless prior to the entry of a final judgment in such other action, a defendant raises the failure to comply with this condition precedent therein, or seeks dismissal thereof based upon a ground set forth in paragraph four of subdivision (a) of rule thirty-two hundred eleven of the civil practice law and rules…

RPAPL § 1301(3) (emphasis added).

Essentially, the Borrower sought to twist the plain language of RPAPL § 1301(3), as amended by FAPA, in an effort to deprive the lender of its rights under the mortgage and obtain a huge windfall.

There is virtually no case law on RPAPL § 1301(3), as amended by FAPA: the question of whether a foreclosing plaintiff could seek to restore a dismissed foreclosure action after having commenced a new one under FAPA has not been addressed by the Courts. As such, Adam Leitman Bailey, P.C. had to get creative. By drawing comparisons to case law for motions to dismiss brought pursuant to CPLR 3211(a) (4) for prior actions pending, Adam Leitman Bailey, P.C. was able to establish that moving to renew and vacate and/or appeal a dismissal order for the change in the law does not render this action restored or “pending” under the law. Adam Leitman Bailey, P.C. also directed the Court to the legislative purposes of both CPLR 3211(a)(4) and RPAPL § 1301(3), as amended by FAPA: to relieve defendants of the burden of litigating more than one action on the same claims.

Ultimately, the Court agreed with Adam Leitman Bailey, P.C., holding:

…as plaintiff correctly notes, the condition precedent for [automatic dismissal under RPAPL §1301(3) as amended by FAPA] is that the prior action ‘is pending.’ Here the new action was commenced while this ac- tion had been dismissed under precent at the time. Consequently, this action was not automatically discontinued by the commencement of the new action.

The Court further held that, upon renewal, Adam Leitman Bailey, P.C. established the lender’s prima facie entitlement to summary judgment, and the borrower failed to raise a triable issue of fact in opposition. Adam Leitman Bailey, P.C. not only successfully restored the action, but it secured summary judgment in favor of its client, thus permit- ting the client to avoid the expense and hassle of a trial.