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Deborah M. Gallo, Esq., with Friedman Vartolo, LLP - NY Statute of Limitations Defense
- By: ALFN
- On: 08/09/2021 14:40:10
- In: Legal Update
Subordinate note holder not successful utilizing Statute of Limitations defense.
In recent decision, Emigrant Bank v. McDonald, Supreme Court, Appellate Division, Second Department, New York, August 4, 2021, --NYS3d--, 2021 WL3378788, the Appellate Court affirmed the judgment of foreclosure and sale where the subordinate note holder attempted to utilize the statute of limitations defense. The defendant Da'Tekena Barango–Tariah appealed from a judgment of foreclosure and sale of the Supreme Court, Kings County, dated November 1, 2017. The order and judgment of foreclosure and sale, an order of the same court dated August 12, 2016, granted those parts of plaintiff's motion which were for summary judgment as asserted against the defendant Da'Tekena Barango–Tariah, to strike that defendant's answer, and for an order of reference, and denying that branch of that defendant's cross motion which was, for summary judgment dismissing the complaint, appointing a referee to compute the amount due to the plaintiff, and confirmed the referee's report and directed the sale of the subject property. The Appellate Court ordered that the order and judgment of foreclosure and sale is affirmed, with costs.
The plaintiff commenced the action to foreclose a mortgage in May 2014. The plaintiff alleged that the defendants Dawna McDonald and Neisha Lynch (borrowers) executed a note that was secured by a mortgage on property located in Brooklyn, and that the borrowers had defaulted under the terms of the subject note and mortgage. McDonald interposed an answer to the complaint and Lynch failed to appear in the action. The defendant, Da'Tekena Barango–Tariah ,(subordinate note holder), filed an answer which included a statute of limitations defense.
The plaintiff made a motion for summary judgment on the complaint against the subordinate note holder, to strike his answer, and to appoint a referee to compute the amount due to the plaintiff. The subordinate note holder opposed the plaintiff's motion and cross-moved, for summary judgment dismissing the complaint insofar as asserted against him. By order dated August 12, 2016, the Supreme Court, granted the plaintiff's motion and denied the subordinate note holder's cross motion. In a second order dated August 12, 2016, the court appointed a referee to compute the amount due to the plaintiff. An order and judgment of foreclosure and sale dated November 1, 2017, confirmed the referee's report, and directed the sale of the subject property. The subordinate note holder appealed from the order and judgment of foreclosure and sale.
The Appellate Court found that, “[T]he Statute of Limitations is generally viewed as a personal defense” (John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544, 550, 415 N.Y.S.2d 785, 389 N.E.2d 99), which is waived if it is not affirmatively pled (see CPLR 3018[b]; see also John J. Kassner & Co. v. City of New York, 46 N.Y.2d at 552, 415 N.Y.S.2d 785, 389 N.E.2d 99; see also 1 Weinstein–Korn–Miller, N.Y. Civ Prac: CPLR ¶ 201.11 [2021]; cf. CPLR 3211[a][5]).
When properly invoked, an action to foreclose a mortgage is subject to a six-year statute of limitations (see CPLR 213[4]). However, an “understanding of the parties' respective rights and obligations under ... the note and the mortgage” is required in order to determine when an action to foreclose a mortgage accrued and whether it is timely (Freedom Mtge. Corp. v. Engel, 37 N.Y.3d 1, 20, 146 N.Y.S.3d 542, 169 N.E.3d 912).
In general, with respect to a mortgage payable in installments, separate causes of action accrue for each installment that is not paid, and the statute of limitations begins to run on the date each installment becomes due. (U.S. Bank Trust, N.A. v. Aorta, 167 A.D.3d 807, 808, 89 N.Y.S.3d 717). However, “residential mortgage contracts ... typically provide[ ] noteholders the right to accelerate the maturity date of the loan upon the borrower's default, thereby demanding immediate repayment of the entire outstanding debt” (Freedom Mtge. Corp. v. Engel, 37 N.Y.3d at 21, 146 N.Y.S.3d 542, 169 N.E.3d 912). When the holder of such a note elects to exercise that remedy, “a cause of action to recover the entire balance of the debt accrues at the time the loan is accelerated, triggering the six-year statute of limitations to commence a foreclosure action” (id.; see CPLR 203[a]; 213[4]).
In this case, the subordinate note holder contended that the plaintiff commenced a prior foreclosure action to enforce the subject note and mortgage in March 2007. Therefore, the note holder alleged that the plaintiff elected to accelerate the mortgage debt when it commenced the 2007 action, and that more than six years had elapsed since that debt had been accelerated. So, the question became whether they elected to revoke the acceleration. The revocation of an election to accelerate a mortgage debt may be accomplished by an “unequivocal overt act” (Albertina Realty Co. v. Rosbro Realty Corp., 258 N.Y. 472, 476, 180 N.E. 176), taken by the holder of the note which “destroy[s] the effect” of the holder's prior election to accelerate the mortgage debt (id. at 476, 180 N.E. 176; see Freedom Mtge. Corp. v. Engel, 37 N.Y.3d 1, 146 N.Y.S.3d 542, 169 N.E.3d 912).
Here, the subordinate note holder conceded that the 2007 action was discontinued less than six years after it was commenced (see Freedom Mtge. Corp. v. Engel, 37 N.Y.3d 1, 146 N.Y.S.3d 542, 169 N.E.3d 912). The plaintiff's submissions, which included a loan modification agreement entered into between the plaintiff and the borrowers, demonstrated that the plaintiff revoked its prior election to accelerate the mortgage debt less than six years after the commencement of the 2007 action. The Supreme Court properly granted that branch of the plaintiff's motion which was for summary judgment striking the subordinate note holder's statute of limitations defense and properly denied that branch of the subordinate note holder's cross motion which was, in effect, for summary judgment dismissing the complaint insofar as asserted against him as time-barred.
Deborah M. Gallo, Esq.
Compliance Attorney
Friedman Vartolo, LLP
dgallo@friedmanvartolo.com
212-471-4100