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Court of Appeals Holds that GOL-17-105 is the Sole Statute Governing the Tolling or Revival of the Statute of Limitations for an Action Pursuant to RPAPL §1501(4)

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  • Posted on: May 27 2022

By Jonathan H. Freiberger

On May 24, 2022, the New York Court of Appeals decided Batavia Townhouses, Ltd. v. Council of Churches Hous. Dev. Fund Co., Inc., and held that “General Obligations Law § 17-105, by its express terms, is the sole statute governing the tolling or revival of the statute of limitations for an action to foreclose a mortgage.”  In so doing, the Court rejected plaintiff’s assertion that GOL §17-101 was equally applicable.  This Blog has written numerous articles related to mortgage foreclosure and has treated GOL §17-101 and §17-105 [here, here, here, and here].

The facts related to the underlying transaction giving rise to the lawsuit as relevant to the Batavia decision were set forth by the Court of Appeals as follows:

Defendant Council of Churches Housing Development Fund Company (Council) borrowed approximately $4.7 million in 1971 to develop and operate Birchwood Village Apartments (Birchwood). Council defaulted on the private loan in 1979, which was insured by the U.S. Department of Housing and Urban Development (HUD). Upon Council’s default, HUD acquired the note and associated mortgage on Birchwood. With HUD poised to foreclose on the property, Council subsequently formed plaintiff Batavia Townhouses, Ltd. (the Partnership) to bring in a cash infusion from private investors. Council is the managing general partner of the Partnership, which also currently has two limited partners: plaintiffs Arlington Housing Corp. and Batavia Investors, Ltd. The Partnership bought Birchwood from the Council in 1979 for $5.5 million and executed a wraparound note and mortgage (wraparound mortgage) in that amount in favor of Council. From 1979 to 2012, the Partnership used income from Birchwood to make payments to Council on the wraparound mortgage, and Council used those funds to pay off the HUD mortgage on the property, which was fully satisfied in February 2012. The Partnership’s wraparound mortgage, the only remaining encumbrance on Birchwood, matured on March 1, 2012. The Partnership made no further payments on that debt for the next seven years, and Council did not commence any foreclosure proceedings.

In 2019, the limited partners brought a derivative action against defendant pursuant to RPAPL § 1501(4) to cancel the wraparound mortgage because it was unenforceable, as time-barred, since the statute of limitations to foreclose the mortgage expired in 2018 – six years after the Partnership’s last payment.  [Eds. Note:  this Blog has written about RPAPL §1501(4) here, here (in which the Batavia Appellate Court decision was discussed), here, here.]  RPAPL §1501(4) permits a mortgagor to commence an action to have an encumbrance of record removed after the expiration of the statute of limitations for the mortgagee to commence foreclosure proceedings.

Defendant, Council, responded by arguing that “the Statute of limitations had been tolled under General Obligations Law §§ 17-101 or 17-105 because the Partnership’s annual financial statements and tax returns for 2012 and 2018 listed the mortgage as an outstanding liability.”  GOL §17-101 provides, in relevant part, that “[a]n acknowledgment or promise contained in a writing signed by the party to be charged thereby is the only competent evidence of a new or continuing contract whereby to take an action out of the operation of the provisions of limitations of time for commencing actions under the civil practice law and rules other than an action for the recovery of real property….” (Emphasis added.)  GOL §17-105(1) provides, in relevant part, that “[a] waiver of the expiration of the time limited for commencement of an action to foreclose a mortgage of real property … or a promise to pay the mortgage debt … by the express terms of a writing signed by the party to be charged is effective … to make the time limited for commencement of the action run from the date of the waiver or promise.”

Supreme court granted plaintiff’s motion for summary judgment, holding that Council was time-barred from commencing a foreclosure action and that GOL §17-105 did not revive same.  According to the Court of Appeals, the Appellate Division agreed that “only General Obligations Law § 17-105 (1) ‘applies to the type of action brought here under RPAPL § 1501 (4), which requires the party bringing such an action to establish that the limitations period for the commencement of a mortgage foreclosure action has expired,’” recognizing that the Appellate Division:

reached that conclusion based on the “plain language” and legislative history of sections 17-101 and 17-105. The Court explained that, although section 17-101 allows a “mere ‘acknowledgment'” to extend the statute of limitations for “contractual debts,” section 17-105 (1) “was enacted specifically to address the waiver of the statute of limitations applicable to mortgage debt and . . . provided that an express promise to pay such debt . . . would be sufficient to revive the otherwise expired statute of limitations”. As a result, the Appellate Division unanimously concluded that the Partnership’s financial statements and tax returns could not revive the limitations period because they “do not constitute an express promise to pay the mortgage debt”.

The Court of Appeals, in granting leave to appeal, recognized that the question that it was required to answer was whether General Obligations Law §§ 17-101 or 17-105 applied to the facts presented by Batavia.  In concluding that General Obligations Law § 17-105, only, applied, the Court of Appeals stated:

Despite what Council contends, General Obligations Law § 17-105, by its express terms, is the sole statute governing the tolling or revival of the statute of limitations for an action to foreclose a mortgage. Section 17-105 (1) states that, among other things, a “promise to pay the mortgage debt, if made after the accrual of a right of action to foreclose the mortgage . . . by the express terms of a writing signed by the party to be charged is effective . . . to make the time limited for commencement of the action run from the date of the . . . promise” (emphasis added). The statute further states that “[e]xcept as provided in subdivision five, no acknowledgment, waiver or promise has any effect to extend the time limited for commencement of an action to foreclose [a] mortgage for any greater time or in any other manner than that provided in this section, nor unless it is made as provided in this section” (§ 17-105 [4] [emphasis added]). Moreover, section 17-101 excludes itself—and by implication its allowance for a mere acknowledgment to toll or revive the statute of limitations—because it indicates that it does not apply to “actions for the recovery of real property.” 

* * *

Under General Obligations Law § 17-105 (1), the Partnership’s actions in this case could only toll or revive the statute of limitations for the Council to bring a foreclosure action if the Partnership made an “express” “promise to pay the mortgage debt.” Accordingly, the Appellate Division correctly concluded that the Partnership’s delivery of its financial statements and tax returns to Council did not meet the requirements of section 17-105 (1) because they were not express promises to pay the mortgage debt.

* * *

The legislative history further demonstrates that the purpose behind General Obligations Law section 17-105 was to require more express actions by a mortgage debtor to toll or revive the statute of limitations so as to prevent “[s]erious impairment of titles to land and hindrance of real property financing” (1961 Law Rev Commn., Acts, Recommendation and Study Relating to Transaction Affecting the Time Limited for an Action to Foreclose a Mortgage of Real Property at 112). It would conflict with that legislative intent to allow an acknowledgment (i.e., an implied promise), as opposed to an express promise, to toll or revive the statute of limitations for a mortgage foreclosure action.

(Citations to the Appellate Division decision and a footnote omitted.)

It should be noted that Judge Wilson issued a lengthy dissent, in part.  


Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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