NY’s Fourth Department Holds That Notice of Default Did Not Provide Clear and Unequivocal Notice to Accelerate the Debt

By: Andrea M. Roberts and Diana M. Eng

In Ditech Financial LLC v. Corbett, 2018 WL 6006682, at *1, —N.Y.S.3d —- (4th Dept. Nov. 16, 2018), the Appellate Division, Fourth Department, held that a notice of default sent to the borrowers-defendants, which discussed a possible future event, did not provide clear and unequivocal notice sufficient to accelerate the debt, thereby triggering the statute of limitations.

In January 2016, plaintiff, Ditech Financial LLC (“Plaintiff”), commenced an action to foreclose against borrowers, Timothy Corbett and Sheila Corbett (“Borrowers”). Plaintiff moved for summary judgment (the “Motion”), and Borrowers opposed the Motion on the grounds that the statute of limitations to foreclose had expired. In support, Borrowers alleged that a January 2010 notice of default (“2010 Default Letter”) sent by Plaintiff’s predecessor-in-interest accelerated the debt and therefore, the statute of limitations to foreclose began to run on the entire debt at that time. The Onondaga County Supreme Court (“Lower Court”) granted Plaintiff’s Motion. Borrowers appealed.

In reaching its decision, the Fourth Department joined the Second and Third Departments in holding that clear and unequivocal notice must be provided to accelerate the entire mortgage debt. Id., at *1 (citations omitted). Moreover, the Fourth Department held that the discussion of a possible future event does not constitute acceleration. Id. Accordingly, the 2010 Default Letter did not “constitute an exercise of the mortgage’s optional acceleration clause,” and the Fourth Department affirmed the Lower Court’s decision. Id.

This is a case of first impression in the Fourth Department. Until the Corbett decision, the Fourth Department had not expressly ruled on the issue of whether a notice of default constitutes an affirmative act of acceleration. The Corbett decision joins a long line of appellate cases in the Second and Third Departments holding that acceleration must be “clear and unequivocal” and that the discussion of a possible future event does not accelerate a debt.

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