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New York Appellate Court Holds Lender’s Mortgage Was Not Reinstated After Borrowers Bought Property Back From City After Tax Foreclosure Banner Image

New York Appellate Court Holds Lender’s Mortgage Was Not Reinstated After Borrowers Bought Property Back From City After Tax Foreclosure

Month: December 2020

New York Appellate Court Holds Lender’s Mortgage Was Not Reinstated After Borrowers Bought Property Back From City After Tax Foreclosure

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The New York Appellate Division, Third Department, recently held that a tax sale foreclosure extinguished a mortgage on a property and, more important, the mortgage was not reinstated when the City later quitclaimed the property back to the borrowers as part of the borrowers’ bankruptcy action. See Wells Fargo Bank, N.A. as Tr. for Carrington Mortg. Loan Tr., Series 2006-NC2 Asset- Backed Pass-Through Certificates v. Budram, 188 A.D.3d 1324 (N.Y. App. Div. 2020).  In 2006, defendants purchased a property and encumbered it with a mortgage that later was assigned to plaintiff.  Defendant later defaulted, and plaintiff brought this foreclosure action and moved for summary judgment in July 2014.  In August 2014, the City acquired title to the property via a tax foreclosure.  A few days later, defendants filed for bankruptcy, staying plaintiff’s foreclosure action.  At the close of the bankruptcy proceeding, the City quitclaimed the property back to defendants.  Plaintiff then asked the trial court to decide its pending summary judgment motion.  Defendants opposed, arguing that the mortgage was extinguished as part of the tax sale and that plaintiff’s action was moot.  The trial court agreed that the mortgage was extinguished and dismissed the action.

On appeal, the Court affirmed. The Court found that the tax sale foreclosure extinguished plaintiff’s lien on the property pursuant to RPTL 1136.  In doing so, the Court rejected plaintiff’s argument that defendants had redeemed the property, finding instead that defendants did not pay the required amount by the redemption date, and that “[a]ny transfer of the property from the City back to defendants after the execution of a tax deed to the City cannot be considered a redemption of the property, nor was it a rescission of the tax foreclosure.”  Accordingly, the mortgage was extinguished and this action was properly dismissed.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Andrew Raimondi at araimondi@riker.com.

Federal Regulations Aim to Further Reduce Pharmaceutical Drug Prices, CMS Releases Outpatient Prospective Payment System and Ambulatory Surgical Center Final Rule, New Measures Taken to Combat COVID 19 During the Upcoming Winter Months, and More

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Daniel J. Parziale.

New Pharmacy Rules and Regulations Aimed to Reduce Pricing

The United States Department of Health and Human Services (“HHS”) and the Centers for Medicare & Medicaid Services (“CMS”) recently issued a series of proposed and final rules aimed at impacting pharmaceutical drug prices and availability.  Specifically, HHS and CMS jointly issued an interim final rule, effective November 27, 2020, that implements the Most Favored Nation Model (the “Model”).   The Model aims to lower prescription drug costs by paying no more for high‑cost Medicare Part B drugs and biologicals than the lowest price that drug manufacturers receive in other countries.  Additionally, HHS issued a final rule, effective January 21, 2021, that creates protections under the federal Anti‑Kickback Statute safe harbor rules for point‑of‑sale reductions in prices for prescription pharmaceutical products.  The final rule also eliminates the safe harbor protection for reduction in prices related to the sale or purchase of prescription pharmaceutical products from manufacturers to plan sponsors under Part D, distinguishing between lawful upfront discounts and unlawful after‑sale rebates.

Also, HHS and CMS jointly issued a proposed rule that introduces a series of changes to the Exchanges under the Affordable Care Act.  One such change was to the medical loss ratio (“MLR”) program.  The rule proposes to define the prescription drug rebates and other price concessions that insurers must deduct from incurred claims for MLR reporting and rebate calculation purposes beginning with the 2022 MLR reporting year. The definitions would fill a gap in the recently amended MLR rules, which require insurers to deduct these items from incurred claims when they are received and retained by the insurer or a pharmacy benefit manager (“PBM”) or other entity providing PBM services to the insurer.

Finally, the FDA announced that it is ending the Unapproved Drugs Initiative, which was originally created in 2006 to reduce the number of drugs on the market that have not successfully completed the FDA approval process.  Ending the initiative is expected to reduce drug costs and decrease the risk of drug shortages.

CMS Finalizes Outpatient Prospective Payment System and Ambulatory Surgical Center Final Rule

CMS has released its Outpatient Prospective Payment System (“OPPS”) and Ambulatory Surgical Center (“ASC”) final rule with comment period.  The following items are some of the major changes of the final rule.

Under the final rule, CMS will begin eliminating the Inpatient Only (“IPO”) list, which consists of 1,700 procedures that Medicare will only pay for when performed in a hospital inpatient setting.  Starting with approximately 300 primarily musculoskeletal‑related services, the IPO list will be completely phased out by 2024.  This does not mean that these procedures can be performed in ambulatory surgery centers (“ASC”), but it is expected that CMS will move some of these procedures to the ASC covered procedures list (“CPL”) in the future.

Following the D.C. Circuit Court of Appeals’ July 31, 2020 decision upholding Medicare payment cuts to certain hospitals participating in the 340B drug pricing program, CMS will continue its current policy of paying for 340B-acquired drugs at Average Sales Price (“ASP”) minus 22.5%.

The final rules increase OPPS and ASC payment rates by 2.4 percent for 2021.  CMS is also adding eleven procedures to the ASC CPL under CMS’s standard review process.  Moreover, CMS has revised the criteria it uses to add surgical procedures to the ASC CPL and, under the revised criteria, will be adding 267 surgical procedures to the list.  The updated list will be effective January 1, 2021.

With respect to physician‑owned hospitals, the final rule seeks to ease some of the expansion limits.  Under the Affordable Care Act, a physician‑owned hospital that increases the number of operating rooms, procedure rooms, and beds cannot qualify for the rural provider or whole hospital exceptions under the physician self‑referral law (the “Stark Law”), unless CMS grants an exception.  The final rule eliminates certain non‑mandated provisions in the exception process applicable to hospitals that qualify as “high Medicaid facilities.”  In particular, CMS removed: (1) the cap on the number of additional operating rooms, procedure rooms, and beds that can be approved in an exception and (2) the restriction that the expansion must occur only in facilities on the hospital’s main campus.  The final rule also increases flexibility to these high Medicaid facilities by including all licensed beds in determining the hospital’s baseline bed count, regardless of the specific number of beds identified on the physical license issued to the hospital by the State.

The final rule has not been published in the Federal Register, but comments will be due 30 days from the date of publication.  The final rule is effective January 1, 2021.

CMS Announces New Model to Advance Regional Value-Based Care in Medicare

CMS announced a new voluntary payment model, the Geographic Direct Contracting Model (the “Model”).  This new Model will test an approach to reducing costs across multiple regions. Through the Model, Direct Contracting Entities (“DCEs”) will take responsibility for beneficiaries’ health outcomes across entire geographic regions.  DCEs will be required to implement region wide care delivery and value-based payment systems.  Beneficiaries in the model will maintain all of their existing original Medicare benefits.  Organizations that are potentially interested in participating in the Model should submit a non-binding Letter of Interest to CMS by 11:59pm PT, on December 21, 2020, through this link: Geographic Direct Contracting Model Letter of Interest.

CMS To Implement 21 New ICD-10 Procedure Codes For COVID-19 Starting January 1, 2021

Starting January 1, 2021, CMS will implement 21 new ICD‑10 procedure codes for COVID‑19 vaccines and therapeutics for the novel coronavirus, including baricitinib and monoclonal antibody treatments.  The FDA recently approved baricitinib, a rheumatoid arthritis drug sold under the brand name Olumiant, for the treatment of patients with COVID‑19 when used in conjunction with remdesivir.  The new ICD‑10 procedure codes will allow healthcare providers to document the use of the drug.  CMS also assigned Medicare Severity‑Diagnosis‑Related Groups (MS‑DRGs) to six new ICD‑10 diagnosis codes for conditions related to COVID‑19, according to the latest announcement on the agency’s MS-DRG Classifications and Software webpage.  The codes that received MS-DRGs were for pneumonia due to COVID‑19, multisystem inflammatory syndrome, other systemic involvement of connective tissue, encounter for COVID-19 screening, suspected exposure to COVID-19, and personal history of COVID‑19.  Providers will be able to report the ICD‑10 diagnosis codes on medical claims on January 1, 2021.  CMS also noted in the announcement that Medicare will pay for the COVID‑19 vaccines and their administration separately from the Diagnosis-Related Group rate.  Providers will be able to bill for the COVID‑19 vaccine on single claims for shot administration, CMS added in a toolkit for providers.

CMS Issues New Guidance Regarding Waivers for Hospitals Without Walls and Ambulatory Surgery Centers.

CMS issued new guidance to expand the flexibilities offered under its waiver program regarding its Hospitals Without Walls initiative to further combat COVID‑19.  These flexibilities include allowances for safe hospital care for eligible Medicare patients in their homes.  CMS also expanded the flexibilities offered under the waiver program for those Ambulatory Surgical Centers that applied to serve as inpatient care centers during COVID‑19.  CMS believes that this will help healthcare systems create capacity to care for the surge of COVID‑19 patients during the winter months.

CMS Finalizes Coverage Expansion for Artificial Hearts and Ventricular Assist Devices

On December 1, 2020, CMS issued its finalized guidance regarding expanding coverage for Artificial Hearts and Ventricular Assist Devices.  Previously, CMS only covered artificial hearts under the “coverage with evidence development” standard which required that the beneficiary be enrolled in a clinical study.  This condition was removed under the new guidance.  In its place, CMS will allow a more standard coverage determination process where coverage decisions are made by local Medicare Administrative Contractors (“MACs”).  This final guidance took effect on December 1, 2020.

California Appellate Court Affirms Statute of Limitations for Quiet Title Action Does Not Run While Plaintiff Possesses Property

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The California Court of Appeals recently affirmed that the statute of limitations in a quiet title action does not begin to run against a party while they are still in possession of the property, even where that possession is shared with another person. See Reuter v. Macal, 2020 WL 6777962 (Cal. Ct. App. 2020).  The parties in this case were a man (Plaintiff) and a woman (Defendant) who had previously been involved in a romantic relationship. In May of 2005, Plaintiff delivered a deed conveying a joint interest in a condominium to Defendant with the expectation that they would get married shortly thereafter. The marriage never took place, and both parties agreed that the romantic relationship had ended by 2011, when Defendant became pregnant by a different man. Although at that time, and intermittently thereafter, the Plaintiff asked Defendant to give up her interest in the condo, she continued to live there with Plaintiff without incident until 2018, when Plaintiff filed an action to quiet title, claiming that the initial conveyance of the interest was conditional on marriage. Defendant’s main defense to the quiet title action was an argument that the statute of limitations began to run in 2011, when the relationship between the parties ended, and had expired by the time of filing in 2018. The trial court held that the statute of limitations had not begun to run until 2018, as in a quiet action, the statute of limitations “does not run against one in possession of land.”

On appeal, the Court affirmed. The California Supreme Court had previously held that in a quiet title action, “no statute of limitations runs against a plaintiff seeking to quiet title while he is in possession of the property,” as “in many instances one in possession would not know of dormant adverse claims . . . [and even if] the party in possession knows of a potential claimant, there is no reason to put him to the expense and inconvenience of litigation until such a claim is pressed against him.” Muktarian v. Barmby, 407 P.2d 659 (Cal. 1965). Here, the court found that “at all times after he executed the May 2005 deed, Plaintiff was in continuous possession of the condominium. And, although he voluntarily shared that possession with Defendant and was presumably aware of her potential adverse claim to title, at no time from the execution of the deed . . . through the filing of Plaintiff’s quiet title action . . . did Defendant assert such an adverse claim of title against him.” Thus, “as long as Plaintiff enjoyed possession of the condominium and defendant did not press her adverse claims against him in a manner that threatened or disturbed that possession, no statute of limitations began to run” and his action to quiet title was timely asserted.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Andrew Raimondi at araimondi@riker.com.

Idaho Federal Court Holds Insured Prohibited from Suing Title Insurance Company After Insured Lost State Court Action Against Title Agent

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The United States District Court for the District of Idaho recently dismissed an action brought by an insured against a title insurance company, finding that the insured had unsuccessfully raised similar claims in a state court action with the title agent.  See Cummings v. Stewart Title Guar. Co., 2020 WL 6747977 (D. Idaho Nov. 17, 2020).  In the case, a non-party sold some of his property to plaintiff.  The title agent prepared a purchase contract and a title commitment, in which the legal description erroneously included land that the seller did not own, as well as land the seller owned but did not intend to sell.  The agent then prepared a deed that excluded the land the seller did not own, but included the land the seller did not intend to sell.  After discovering its mistake, the title agent re-recorded a deed with the correct legal description, but without plaintiff’s consent.  The title agent also issued a title insurance policy on defendant’s behalf, in which the legal description matched that of the re-recorded deed.  Plaintiff then brought an action against the seller and the title agent in state court, claiming that he was entitled to the property erroneously included in the first deed and alleging negligence against the title agent.  The trial court award plaintiff judgment against the agent only for negligence, but this decision was reversed by the Idaho Supreme Court.  See Cummings v. Stephens, 157 Idaho 348 (2014).  Plaintiff then brought this action against the defendant title insurance company alleging breach of contract and bad faith, and defendant moved for summary judgment.

The Court granted defendant’s motion.  First, it denied defendant’s argument that the action was barred by the Rooker-Feldman doctrine, which holds that federal district courts do not have jurisdiction to review final decisions of state courts or reverse or modify state court judgments.  The Court found that plaintiff’s action does not claim any error by the state court, but instead simply that defendant breached its contract with plaintiff and acted in bad faith.  Second, the Court nonetheless found that the doctrines of claim and issue preclusion barred the complaint, because the issues raised in this action were unsuccessfully litigated by plaintiff in the state court action.  “Each of these issues turns on whether [plaintiff] can establish that he was supposed to have received property east of the highway as part of his purchase of Stephens’ Ranch. Because this issue has already been fully litigated in state court, [plaintiff] cannot relitigate the issue here.”  Thus, because the state court action established that plaintiff was not entitled to this additional land, he could have no claim against the title insurance company here for breach of contract or bad faith regarding this land.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Anthony Lombardo at alombardo@riker.com.

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