New York's Highest Court Agrees To Hear Constitutional Challenge To Estoppel Provision Of FAPA

• Published date: 27 May 2025
• Law Firm: Goodwin Procter LLP
• Author: Christian Fletcher

On May 20, 2025, the New York Court of Appeals agreed to hear constitutional challenges to one aspect of New York's Foreclosure Abuse Prevention Act (FAPA). In two separate cases ' Van Dyke v. U.S. Bank, N.A. and Article 13 LLC v. Ponce de Leon Fed. Bank - at issue is Section 7 of FAPA, codified at CPLR 213(4)(B), which estops a mortgage lender from opposing a claim that the mortgage is too old to enforce.

Both cases are quiet title actions seeking to cancel and discharge mortgages, one brought by a borrower and one brought by a junior lien holder. In each case, the appellant lender has been "estopped from asserting" its mortgage is not time-barred, in accordance with FAPA's amendment of New York's statute of limitations. Both cases on appeal were commenced before FAPA became effective in 2022, but in both judgments, FAPA was applied retroactively.

By way of background, the terms of most residential mortgages require, as a pre-condition to foreclosing, acceleration of the maturity date of the underlying installment debt. Acceleration creates the right to foreclose and therefore starts the statute of limitations clock (six years in New York). Acceleration is usually accomplished by commencing a foreclosure action. If a foreclosure action is terminated before judgment for some reason and the lender wants to later commence another one, the time clock to do so, unless explicitly stopped or reset, continues running. FAPA, effective December 30, 2022, restricted not only how such limitations clocks can be stopped or reset, but also the ability of a lender to argue, as is often the case, that the clock had never started in the first place. Unchanged by FAPA, New York law says when a plaintiff lacks standing to foreclose, its foreclosure action does not accelerate the debt's maturity and therefore does not start the limitations period, but FAPA did sharply restrict a debt owner's right to raise that legal argument at all. In a quiet title action, for instance, where a party seeks to discharge a mortgage as time-barred, FAPA estops the defendant mortgagee from arguing that, because the foreclosing plaintiff lacked standing, the clock had never started. The only exception is a carve-out where "the prior action was dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated." CPLR 213(4)(B).

In Van Dyke, the New York Court of Appeals granted the defendant lender permission to appeal from a decision and order of New York's First Department, Appellate Division, affirming a Bronx County Supreme Court quiet title order and judgment. Van Dyke, a mortgage loan borrower, brought a quiet title action against the owner of her loan, U.S. Bank, seeking to expunge her mortgage. A prior foreclosure action had been commenced in 2009 by a different lender, the Bank of New York, and following the denial of summary judgment in that action based on the existence of issues of fact as to whether the Bank of New York had standing to foreclose, the action was discontinued by stipulation. Years later, in opposing summary judgment in the quiet title case, U.S. Bank argued that the Bank of New York had lacked standing to bring the 2009 action, and therefore the statute of limitations to enforce the mortgage has never started. While the quiet title case was pending, FAPA became law. After supplemental briefing on FAPA's effects, the trial court retroactively applied FAPA's estoppel provision, found the lender did not fall into the "expressed judicial determination" carve-out, and therefore rejected U.S. Bank's standing arguments. The First Department, citing its prior...