Opinion
Index No. 610595/2021
10-06-2023
WILMINGTON TRUST, N.A., Not in Its Individual Capacity but Solely AS TRUSTEE FOR MFRA TRUST 2014-2, Plaintiff, v. Edward GAWLOWSKI a/k/a Edward W. Gawlowski, Victoria Gawlowski a/k/a Victoria M. Gawlowski, Val-Elm Realty Corp., Portfolio Recovery Associates, LLC, John Doe and Jane Doe, Defendants.
PLAINTIFF'S ATTORNEYS: FRIEDMAN VARTOLO, LLC, 1325 Franklin Avenue, Suite 160, Garden City, NY 11530 DEFENDANTS’ ATTORNEYS: MILLER, ROSADO & ALGIOS, LLLP, 320 Old Country Road, Suite 103, Garden City, NY 11530
PLAINTIFF'S ATTORNEYS: FRIEDMAN VARTOLO, LLC, 1325 Franklin Avenue, Suite 160, Garden City, NY 11530
DEFENDANTS’ ATTORNEYS: MILLER, ROSADO & ALGIOS, LLLP, 320 Old Country Road, Suite 103, Garden City, NY 11530
C. Stephen Hackeling, J. Upon the papers read on Defendants’ e-filed motion seeking renewal of the Court's order dated April 18, 2022 denying Defendants’ cross motion to dismiss it is
ORDERED that Defendants’ motion (motion seq. 003 ) to renew is granted; and after reconsideration, again denying Defendants’ cross-motion for summary judgment on the second affirmative defense; and it is further
ORDERED that Plaintiff is directed to promptly serve Defendants with a copy of this decision and order together with notice of entry.
DECISION
The First Action
As relevant to the issues raised herein, a prior action to foreclose the same mortgage being foreclosed in this case was commenced (Index No. 026224/2011)(the "First Action") when Plaintiff's predecessor filed a complaint in 2011; the complaint accelerated the debt owed by Defendants [NYSCEF Doc. No. 88 ¶ 22]. Plaintiff's predecessor moved in the First Action for a default judgment and Defendants cross-moved for dismissal pursuant to CPLR § 3215(c). The Court held in the First Action that Defendants had waived their right to a dismissal under CPLR § 3215(c) but on December 23, 2020, the Appellate Division reversed and dismissed the case as abandoned. Relying on the "savings provision" contained in CPLR § 205(a) - plaintiff timely commenced this action.
The Current Action
Within six months of the First Action being dismissed, on June 4, 2021, Wilmington Trust, N.A., not in its individual capacity, but solely as Trustee for MFRA Trust 2014-2 ("Plaintiff") again commenced this action (the "Current Action") to foreclose its residential mortgage on property owned by defendants Edward Gawlowski a/k/a Edward W. Gawlowski, Victoria Gawlowski a/k/a Victoria M. Gawlowski ("Defendants") located at 31 Harrison Drive, Shirley, New York 11967. The complaint alleges in the Current Action that Defendants defaulted on the payments required under the mortgage that became due on August 14, 2011 and all payments thereafter.
Motion and Cross-Motion for Summary Judgment
In connection with the Current Action, Plaintiff moved by Notice of Motion dated November 15, 2021 (motion seq. no. 001 ) for summary judgment. By Notice of Cross-Motion (motion seq. no. 002 ) Defendants cross-moved for summary judgment on their statute of limitations affirmative defense.
Motion Sequences 001 and 002 were decided by Order dated April 18, 2022 (the "April 2022 Order"); this Court (Rouse, AJSC )[NYSCEF Doc. Nos. 106, 107] opined that:
The plaintiff timely recommenced this action as the prior action had not been dismissed upon any of the exceptions to CPLR § 205 that bar a new action after termination of the previous action.
Defendants contend that the court in Deutsche Bank Natl. Trust Co. v. Brathwaite , 197 A.D.3d 557 (2d Dept. 2021) held that an action dismissed pursuant to CPLR § 3215(c) was not entitled to saving provision of CPLR § 205. That is incorrect. In Brathwaite , the court expressly held that a CPLR § 3215(c) dismissal was not on the merits and was not a dismissal with prejudice. The reference in CPLR § 205 to "a dismissal of the complaint for neglect to prosecute the action" is a reference, as expressly made in CPLR § 205, to a dismissal pursuant to CPLR § 3216. Plaintiff's action was not dismissed pursuant to CPLR § 3216. Accordingly, the defendants’ cross motion to dismiss the present action pursuant to CPLR § 3212, upon their contention the action is barred by the statute of limitations, is denied. Emphasis added.
By Notice of Motion dated January 9, 2023 (motion sequence no. 003 ), Defendants move under CPLR § 2221(e)(2) for an order granting renewal of this Court's April 2022 Order. Plaintiff opposes the motion.
DISCUSSION
"A motion for leave to renew is the appropriate vehicle for seeking relief from a prior order based on a change in the law." Dinallo v. DAL Elec. , 60 A.D.3d 620, 621, 874 N.Y.S.2d 246 (2009) ; see CPLR § 2221(e)(2) ; Opalinski v. City of New York , 205 A.D.3d 917, 919, 168 N.Y.S.3d 116 (2d Dept. 2022). However, "[a]fter entry of a final judgment, a motion for leave to renew pursuant to CPLR § 2221(e)(2) based upon a ‘change in the law that would change the prior determination’ must be made, absent circumstances set forth in CPLR § 5015, before the time to appeal the final judgment has." Matter of Eagle Ins. Co. v. Persaud , 1 A.D.3d 356, 357, 766 N.Y.S.2d 571 (2d Dept. 2003), quoting CPLR § 2221(e)(2) ; see Washington Mut. Bank, FA v. Itzkowitz , 47 A.D.3d 923, 923, 851 N.Y.S.2d 599 (2d Dept. 2008) ; Daniels v. Millar El. Indus., Inc. , 44 A.D.3d 895, 845 N.Y.S.2d 785 (2d Dept. 2007).
Here, Defendants explicitly argue that renewal is warranted because "there has been a change effected by the New York Legislature in the law governing the statute of limitations in mortgage foreclosure actions that became effective on December 30, 2022 and which would clearly alter the determination in the Order that this action was timely commenced. Specifically, a new CPLR § 205-a ...." See NYSCEF Doc. No. 113 ¶ 2.
It is undisputed that none of the circumstances set forth in CPLR § 5015 are applicable to this case. It is also undisputed that Defendants’ motion for leave to renew was made after the entry of the final judgment and no appeal was taken. Indeed, the notice of entry was electronically filed on April 25, 2022 therefore the time to appeal (or to file a motion to renew) expired May 25, 2022. Defendants’ motion to renew was not filed until January 9, 2023 - over 7 months after the deadline to appeal/move to renew. Inasmuch as Defendants failed to file their motion for leave to renew based upon a change in the law prior to the entry of a final judgment or before the time to appeal fully expired, Defendants’ motion should be denied because the April 2022 Order is a final and non-appealable order. That would have been the end of this issue but for Governor Hochul signing the Foreclosure Abuse Prevention Act effective December 30, 2022. FAPA
The Foreclosure Abuse Prevention Act of 2022 (hereafter "FAPA") amended six laws, i.e. CPLR § 203, CPLR § 205, CPLR § 213, CPLR § 3217, RPAPL § 1301, and Gen. Oblig. Law § 17-105. It is not seriously disputed that but for the FAPA amendments, this case is not barred under New York's Statute of Limitations CPLR § 213(4). Prior to FAPA, this Court found in the April 2022 Order that dismissal of the First Action was pursuant to CPLR § 3215(c), and was "not with prejudice" resulting in Plaintiff being able to avail itself of the CPLR § 205-a six months refiling savings clause. The April 2022 Order was not appealed and is now final. FAPA RETROACTIVITY
The parties to this summary judgment motion fleetingly also argued the issue of whether the Gawlowskis renewed the six-year statute of limitations via written declaration pursuant to New York Gen. Oblig. Law § 17-105. Judge Rouse did not address this disputed contention in his decision, although at that time "Sec. 17-105 effectively revived a time-barred claim when the mortgagor has signed a writing validly acknowledging the debt." Seattle Pac. Indus. Inc. v. Golden Val. Realty Assoc. , 54 A.D.3d 930, 864 N.Y.S.2d 500 (2d Dept. 2008) ; Lynford v. Williams , 34 A.D.3d 761, 826 N.Y.S.2d 335 (2d Dept. 2006). See also , Hui v. East Broadway Mall , Inc. , 4 N.Y.3d 790, 795 N.Y.S.2d 157, 828 N.E.2d 73 (2005) ; Knoll v. Datek Sec. Corp. , 2 A.D.3d 594, 769 N.Y.S.2d 581 (2d Dept. 2003) wherein the writing must contain nothing inconsistent with an intention to pay. The Second Department has held that pre-FAPA mortgage foreclosure statutes of limitation can be "renewed" via a written § 17-105 declaration contained in a bankruptcy petition acknowledging a mortgage debt and which promises to repay it. PSP-NC LLC v. Raudkivi , 138 A.D.3d 709, 29 N.Y.S.3d 51 (2d Dept. 2016) ; National Loan Invs. v. Piscitello , 21 A.D.3d 537, 801 N.Y.S.2d 331 (2d Dept. 2005) ; Albin v. Dallacqua , 254 A.D.2d 444, 679 N.Y.S.2d 402 (2d Dept. 1998). See also, 14 Fillm Corp. v. Mid Island Mortg. , 2023 N.Y. Slip Op. 03759, 218 A.D.3d 525, 192 N.Y.S.3d 539 (2d Dept. 2023) for similar holding for loan modification; Clearly, the Gawlowskis renewed the subject statute of limitations under pre-FAPA law when they executed their bankruptcy Statement of Intention (NYSCEF Doc. No. 120).
Defendants now seek to renew the April 2022 Order (even though their motion was untimely), asserting that FAPA's amendments to CPLR §§ 203 and 205 bar Plaintiff from utilizing the six-month savings statute and FAPA's § 10's provision that permits the new law to apply retroactively to the April 2022 final order.
Defendants assert in their application that FAPA brings § 3215 dismissals into the realm of ineligibility for the § 205(a) savings clause because FAPA changed § 205(a) to add that the savings clause is unavailable if the prior case was dismissed under CPLR § 3215(c). Premised thereon, Defendants argue that the Current Action must be dismissed as violative of New York's six year statute of limitations. This argument can only apply to the Current Action if FAPA's retroactive component applies.
The FAPA December 30, 2022 effective date post dates the April 2022 Order which became "final" and no longer appealable as of May 25, 2022. However, § 10 of FAPA contains a rather unusual "retroactivity" provision which states:
"This act 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. " (Emphasis added).
I. Vested Rights Doctrine
Plaintiff challenges the constitutionality of FAPA's retroactive application to the final April 2022 Order on substantive due process grounds under the United States and New York State Constitutions which are generally described as a "vested rights" theory.
The New York Court of Appeals has previously determined that any legislative act that retrospectively deprives a party of a "vested right" in property is forbidden by Article 1, Section 6 of the New York State Constitution. Germania Savings Bank v. Village of Suspension Bridge , 159 N.Y. 362, 54 N.E. 33 (1899). This case cites to Burch v. Newbury , 10 N.Y. 374 (1852), for the proposition that final judgments are vested rights. Article 1, Section 6 provides "no person shall be deprived of life, liberty, or property without due process of law." New York's due process constitutional requirement has been construed to be even broader and more protectively encompassing than the constitutional requirement of due process as detailed in the fifth and fourteenth amendments of the United States Constitution. See Walton v. NYS Dept. Correctional Serv. , 18 Misc.3d 775, 849 N.Y.S.2d 395 (Sup. Ct. Albany County 2007) citing to People v. LaValle , 3 N.Y.3d 88, 783 N.Y.S.2d 485, 817 N.E.2d 341 (2004) ; Sharrock v. Dell Buick–Cadillac, Inc. , 45 N.Y.2d 152, 408 N.Y.S.2d 39, 379 N.E.2d 1169 (1978). In the mid-twentieth century, the Court of Appeals eroded the "bright line" Germania court "vested rights" doctrine. It instead introduced a "rational basis" balancing test when construing the constitutional validity of the "vested rights" doctrine. See Chrysler Properties Inc. v. Morris , 23 N.Y.2d 515, 297 N.Y.S.2d 723, 245 N.E.2d 395 (1969), citing Charles B. Hochman, Retroactive Legislation , 73 HVLR 692 (1960) ; HSBC Bank v. IPA Asset Management. LLC, 79 Misc.3d 821, 190 N.Y.S.3d 622 (Sup. Ct., Suffolk County 2023). It is interesting that although the Court of Appeals affirmed the "due process" rational basis balancing test again in 1987, it also affirmatively found that there exists a "final judgment" exception to the doctrine wherein res judicata was acknowledged to be a bar to the application of a legislative retroactivity clause. Hodes v. Axelrod , 70 N.Y.2d 364, 520 N.Y.S.2d 933, 515 N.E.2d 612 (1987), citing to Reilly v. Reid , 45 N.Y.2d 24, 407 N.Y.S.2d 645, 379 N.E.2d 172 (1978). See also , Ruffolo v. Garbarini Scher, P.C. , 239 A.D.2d 8, 668 N.Y.S.2d 169 (1st Dept. 1998).
While not expressly labeled as a "final order res judicata " doctrine, recent courts still find that the "vested property rights" doctrine is viable if the subject judgment is not reviewable by a higher court. See, Opalinski v. City of New York , 205 A.D.3d 917, 168 N.Y.S.3d 116 (2d Dept. 2022) ; US Bank v. Miele, 80 Misc.3d 839, 197 N.Y.S.3d 656 (Sup. Ct., Westchester County 2023), citing to Boardwalk & Seashore Corp. v. Murdock , 286 N.Y. 494, 36 N.E.2d 678 (1941) ; Atlantic Beach Towers Const. Co. v. Michaelis , 21 A.D.2d 875, 251 N.Y.S.2d 794 (2d Dept. 1964). See, MTGLQ Inv. L.P. v. Gross , 79 Misc.3d 353, 190 N.Y.S.3d 244 (Sup. Ct., Westchester County 2023). See also , US Bank Nat. Assoc. v. Johns , 2023 N.Y. Slip Op. 32683(U), 2023 WL 5057214 (Sup. Ct., N.Y. County 2023) for the proposition that FAPA's retroactivity clause is always unconstitutional as it "would destroy rights already accrued by the Plaintiff." Id.
As the instant case involves the final order exception, this Court need not address the rational basis balancing test described in American Economy Ins. Co. v. State of New York , 30 N.Y.3d 136, 65 N.Y.S.3d 94, 87 N.E.3d 126 (2017) except to note that a review of the relevant case law reveals few instances where courts did not find a rational legislative basis.
In this Court's opinion, the legislature has not even met the low standard now adopted. There appears no rational explanation as to why the legislature included a retroactivity clause in FAPA in direct contravention of an existing statute. The Court of Appeals in Hodes v. Axelrod expressly cited to McKinney's Cons. Laws of New York, Book 1, Statutes, Section 58 as the foundational underpinning to its vested rights final order exception decision. Hodes v. Axelrod, 70 N.Y.2d 364, 520 N.Y.S.2d 933, 515 N.E.2d 612 (1987). Sec. 58 provides: "Judgments-A judgment, after it is final, may not be affected by subsequent legislation." Absent repeal of this statute, a retroactivity clause is irrational.
II. Separation of Powers and Res Judicata
The fundamental gravamen of the res judicata final order exception is the Separation of Powers Doctrine. The Constitution creates three branches of Government and vests each branch with a different type of power. See Art. I, § 1 ; Art. II, § 1, cl. 1 ; Art. III, § 1. "To the legislative department has been committed the duty of making laws; to the executive the duty of executing them; and to the judiciary the duty of interpreting and applying them in cases properly brought before the courts." Patchak v. Zinke , 583 U.S. 244, 138 S. Ct. 897, 200 L.Ed.2d 92 (2018) citing Massachusetts v. Mellon , 262 U.S. 447, 488, 43 S.Ct. 597, 67 L.Ed. 1078 (1923) ; see also Wayman v. Southard , 10 Wheat. 1, 46, 6 L.Ed. 253 (1825) (Marshall, C.J.) ("[T]he legislature makes, the executive executes, and the judiciary construes the law"). By vesting each branch with an exclusive form of power, the Framers kept those powers separate. See INS v. Chadha , 462 U.S. 919, 946, 103 S.Ct. 2764, 77 L.Ed.2d 317 (1983). Each branch "exercise[s] ... the powers appropriate to its own department," and no branch can "encroach upon the powers confided to the others." Id. at 905 citing Kilbourn v. Thompson , 103 U.S. 168, 191, 26 L.Ed. 377 (1880). This system prevents "[t]he accumulation of all powers, legislative, executive, and judiciary, in the same hands," The Federalist No. 47, p. 301 (C. Rossiter ed. 1961) (J. Madison)—an accumulation that would pose an inherent "threat to liberty." Clinton v. City of New York , 524 U.S. 417, 450, 118 S.Ct. 2091, 141 L.Ed.2d 393 (1998).
The Separation of Powers Doctrine precludes the legislature from undertaking to readjudicate controversies that have been litigated in the courts and resolved by final judicial judgment. 16 Am. Jur. 2d Constitutional Law, Legislative Interference in Litigation, § 300. FAPA's Legislative Memorandum (2021 Bill text 7737) in support ascribes that the legislation's purpose was to correct the Court of Appeals alleged incorrect decision in Freedom Mtg. Co. v. Engel , 37 N.Y.3d 1, 146 N.Y.S.3d 542, 169 N.E.3d 912 (2021). A legislative body violates the separation of powers doctrine by purporting to retroactively overrule a final judicial decision by a subsequent declaration of what the legislature originally intended. Id. Similarly, legislation that targets an Appellate Court's final decision, seeking to reinterpret the meaning of a prior statute, constitutes a legislative adjudication of the case in contravention of the separation of powers doctrine. See, Ruiz v. United States , 243 F.3d 941 (5th Cir. 2001). For this reason, Congress is constitutionally forbidden to command federal courts to reopen final judgments. Patchak v. Zinke , 583 U.S. 244, 138 S. Ct. 897, 200 L.Ed.2d 92 (2018) ; Ruiz v. United States , 243 F.3d 941 (5th Cir. 2001).
"It is the intention of the constitution that each of the great coordinate departments of the government - the Legislative, the Executive and the Judicial - shall be, in his sphere, independent of the others." United States v. Klein , 80 U.S. 128, 13 Wall. 128, 20 L.Ed. 519 (1871). "Separation of Powers principles ... protect each branch of government from incursion by the others." Bond v. United States , 564 U.S. 211, 131 S. Ct. 2355, 180 L.Ed.2d 269 (2011). It is the Judicial branch of government that decides private disputes arising under such constitutional or statutory dictates. See, Hernandez v. Robles , 7 N.Y.3d 338, 821 N.Y.S.2d 770, 855 N.E.2d 1 (2006) ; Austin v. NYS Dept. of Correctional , 18 Misc.3d 775, 849 N.Y.S.2d 395 (Sup. Ct., Albany County 2007). It is the judiciary that determines whether the principle of "Separation of Powers" has been violated. Baker v. Carr , 369 U.S. 186, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). The United States Constitution prohibits the legislature from co-opting the judiciary's function. Patchak v. Jewell , 109 F. Supp. 3d 152 (U.S. Dist. Ct., D.C. 2015) citing to U.S. v. Klein , 80 U.S. 128, 13 Wall. 128, 20 L.Ed. 519 (1871).
The New York State Constitution also provides for a three-branch, equal and independent governmental system. One of the components of separation of powers derives from the notion that once a final judicial decision is made, it may not be ... legislatively countermanded. "[O]nce a court judgment is final and unalterable (because no further right of appeal exists), then the judgment conferred a vested right ... which could not be deprived by an act of the legislature." Germania Savings Bank v. Village of Suspension Bridge , 159 N.Y. 362, 54 N.E. 33 (1899). "The ‘vested rights’ retroactivity doctrine which has been previously discussed infra dates back to New York's Colonial Common Law." See generally, Burch v. Newbury , 10 N.Y. 374 (1852). Central to this doctrine concerning retroactive law-making was the Court of Appeals repeated holding that the legislature could not annul an "existing complete and final judgment." Id. The Burch court recognizing that to hold otherwise would mean "no judicial judgment can ever be ‘rested upon as final.’ " See also, Glicksman v. Bd. of Ed. Comsewogue S.D. , 278 A.D.2d 364, 717 N.Y.S.2d 373 (2d Dept. 2000) noting that otherwise the time to appeal is forever extended.
Despite introducing a "rational basis balancing test" into the "vested rights" doctrine, the Court of Appeals has never backed away from its position that "final order" vested rights can never be changed by legislative decree. To do so would violate the constitutional Separation of Powers as the Legislature, theoretically speaking, would then be the potential final arbiter of "all" disputes. The Judiciary's province would be co-opted and it would no longer be a co-equal branch to government. As the statute of limitations issue in this proceeding was conclusively litigated to a final, no longer appealable order, its judicial decree is not subject to retroactive relitigation. Normally, this Court attempts to harmonize conflicting law so as to avoid constitutional infirmity. See, People of State of New York v. Felix, 58 N.Y.2d 156, 460 N.Y.S.2d 1, 446 N.E.2d 757 (1983) citing to McKinney's Consol. Law of New York Book 1, § 150. However, it appears impossible to construe FAPA's Sec. 10 language "final Judgment of Foreclosure and Sale is enforced" in any manner which is compatible with res judicata's concept of "final order or judgment." Fortunately, FAPA does contain a "severability clause" and this Court is authorized to sever the offending retroactivity clause.
The ease with which the legislature attempts to undermine judicial decision making - as shown by its proclamation in FAPA that the law "shall apply to all actions . . in which a final judgment of foreclosure and sale has not been enforced" is unconstitutional. Accordingly, the Court declares FAPA's § 10's retroactivity clause to violate the New York and United States Constitutions in any proceeding, like here, involving relitigation of a final order. Defendants’ application to renew is granted and, upon reconsideration, is again denied.