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Fourth Department Applies the Common-Law “Partial Payment Exception”, which Starts the Statute of Limitations on a Mortgage Foreclosure Action to Run Anew

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  • Posted on: Apr 29 2022

By Jonathan H. Freiberger

Statute of limitations issues frequently arises in mortgage foreclosure actions.  This Blog has written extensively on a variety of issues related to mortgage foreclosure, including those related specifically to limitations periods (see, e.g., [here], [here], [here] and [here].  

In this Blog article entitled: “Revive a Time-Barred Claim Using § 17-101 of New York’s General Obligations Law” addressed situations where certain writings acknowledging a mortgage debt, that comply with General Obligations Law § 17-101, can operate to revive an otherwise time-barred foreclosure claim.  There, we also discussed the general purpose of statutes of limitations, noting that:

“The Statute of Limitations was enacted to afford protection to defendants against defending stale claims after a reasonable period of time had elapsed during which a person of ordinary diligence would bring an action. The statutes embody an important policy of giving repose to human affairs.” Flanagan [v. Mount Eden General Hospital], 24 N.Y.2d [427] at 429 [1969] (citation omitted).

It has been stated that “the primary purpose of Statutes of Limitation is to relieve defendants of the necessity of investigating and preparing a defense where the action is commenced against them after the expiration of the statutory period because the law presumes that by that time evidence has been lost, memories have faded and witnesses have disappeared.”  Connell v. Hayden, 83 A.D.2d 30 (2nd Dep’t 1981). 

As to the limitations period relevant to mortgage foreclosure actions, we have previously written that:

An action to foreclose a mortgage is governed by a six-year statute of limitations.  CPLR 213(4)See also, Fed. Nat. Mort. Assoc. v. Schmitt, 172 A.D.3d 1324, 1325 (2nd Dep’t 2019).  When a mortgage is 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.”  HSBC Bank USA, N.A. v. Gold, 171 A.D.3d 1029, 1030 (2nd Dep’t 2019).  Most mortgages, however, provide that a mortgagee may accelerate the entire debt in the event of, inter alia, a payment default by a mortgagor. Thus, “the terms of the mortgage may contain an acceleration clause that gives the lender the option to demand due the entire balance of principal and interest upon the occurrence of certain events delineated in the mortgage.”  Bank of New York Mellon v. Dieudonne, 171 A.D.3d 34, 37 (2nd Dep’t 2019) (citations and internal quotation marks omitted).  Once the mortgagee’s election to accelerate is properly made, “the borrower’s right and obligation to make monthly installments ceased and all sums became immediately due and payable.”  The statute of limitations begins to run anew on the entire debt upon acceleration.  HSBC, 171 A.D.3d at 1030 (citations omitted).

“[T]o dismiss an action pursuant to CPLR 3211(a)(5) on the ground that it is time-barred by the applicable statute of limitations, a defendant bears the initial burden of demonstrating, prima facie, that the time within which to commence the action has expired.”  Gurecki v. Gurecki, 189 A.D.3d 1729, 1731 (3rd Dep’t 2020) (citations internal quotation marks and brackets omitted).  “If the defendant satisfies this burden, the burden shifts to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or otherwise inapplicable.”  Gurecki, 189 A.D.3d at 1731 (citation and internal quotation marks omitted).

Section 17-101 of the GOL can provide a statutory basis to revive the limitations period to foreclose a mortgage in the face of a qualifying writing.  Similarly, the “common-law, partial payment exception to the statute of limitations …, if proven, has the effect of extending or renewing the statute of limitations period” when qualifying partial payments are made to lender.  McNeary v. Charlebois, 169 A.D.3d 1295, 1296 (3rd Dep’t 2019) (citations omitted).  According to this exception, a “debtor’s partial payment toward a mortgage debt may renew the statute of limitations in a foreclosure action if the creditor “show[s] that there was a payment by the debtor or the debtor’s agent of an admitted debt, made and accepted as such, accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due, from which a promise may be inferred to pay the remaining balance.”  Wells Fargo Bank N.A. v. Grover, 165 A.D.3d 1541, 1542 (3rd Dep’t 2018) (citations and internal quotation marks omitted).

In 1998, the Gurecki plaintiff (“lender”) sold property to a family member and took a note secured by a mortgage on the property to evidence the repayment obligation.  The note, which did not require periodic payments, came due in 2008 and borrower defaulted.  The mortgage was not recorded until April 2017.  In May of 2017, borrower sold the property to a third-party (“buyer”), who obtained a mortgage from the Bank of Greene County (“bank”).  The title report issued in conjunction with the sale to purchaser failed to turn out the belatedly recorded mortgage.  Lender commenced a foreclosure action and named borrower, buyer and bank as defendants.  Buyer and bank moved to dismiss the complaint as against them asserting, inter alia, a statute of limitations defense.  Supreme court denied the motion and buyer and bank appealed.  The Third Department reversed.

To support a “partial payment exception” argument Lender averred that borrower “made payments, in varying amounts, on fourteen occasions over an eight-year period.  Twelve of the payments were made before the expiration of statute of limitations and two were made after. As to first twelve payments, the Gurecki Court stated they were “mere naked payments of money without anything to show on what account, or for what reason, the money was paid, and, thus, they are insufficient to raise an issue of fact as to whether the statute of limitations was tolled.”  Gurecki, 189 A.D.3d at 1731 (citations and internal quotation marks omitted).  As to the last two payments, however, lender averred they were “accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due, from which a promise may be inferred to pay the remainder” sufficient to satisfy the requirements of the “partial payment exception.” Gurecki, 189 A.D.3d at 1731.

The Gurecki Court found the exception inapplicable to the buyer and bank and, in so doing, made a distinction focusing on the timing of the payments:

[h]owever, the tolling or revival effect of partial payments differs as between the payor – [borrowers] – and subsequent purchasers – buyer and bank (see General Obligations Law § 17–107[2] ). To that end, as relevant here, a qualifying partial payment that is made before the expiration of the statute of limitations will renew the statute of limitations against any subsequent purchaser. In contrast, a qualifying partial payment that is made after the expiration of the statute of limitations will only revive the statute of limitations as to a subsequent purchaser who did not give value or who had actual notice of the making of the payment (see General Obligations Law § 17–107[2][a]; [2d par]). Here, even assuming that the 2016 payments met the test set forth in Lew Morris Demolition Co. v. Board of Educ. of City of N.Y., 40 N.Y.2d at 521, 387 N.Y.S.2d 409, 355 N.E.2d 369 [1976], at the time that they were made the statute of limitations had expired. Given that the record is clear that [buyer and bank] are purchasers for value and [lender] put forth no evidence that [buyer and bank] had actual notice of the 2016 payments, the payments did not have the effect of reviving the statute of limitations as to [buyer and bank].

Gurecki, 189 A.D.3d at 1732 (some citations and footnote omitted; emphasis in original).

The Fourth Department, on April 22, 2022, addressed these issues in Citibank, N.A. v. Gifford. There, borrowers, Thomas and Marlene, executed a noted secured by a mortgage on their residence.  Thomas executed a modification agreement twenty years later.  Lender commenced a mortgage foreclosure action and moved for summary judgment.  Borrower cross-moved for summary judgment on statute of limitations grounds.  Supreme court granted lender’s motion as against Thomas and denied it as against Marlene and granted the cross-motion to the extent that it sought dismissal as against Marlene.  The Fourth Department modified the order to the extent of denying the cross-motion as to Marlene and granting lender’s motion in its entirety.  After discussing the issues previously set forth in this article, the Court stated:

Here, even assuming, arguendo, that [Thomas and Marlene] met their initial burden on their cross motion, we conclude that [lender] established in opposition that the common-law, partial payment exception to the statute of limitations had the effect of extending or renewing the statute of limitations period with respect to Thomas…. The partial payment exception requires proof that there was a payment of a portion of an admitted debt, made and accepted as such, accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due, from which a promise may be inferred to pay the remainder.  If the exception is established, the statute of limitations begins to run anew from the date of the partial payment. For [lender]’s action to have been timely commenced, a qualifying partial payment must have been made on or after April 18, 2013. Here, [lender]’s submissions demonstrated that a payment in the amount of the monthly payment required under the terms of the 2011 Agreement was made on or about May 1, 2017. Indeed, lender’s submissions showed that it received multiple payments in that amount between April 2013 and May 2017, and [Thomas and Marlene] did not dispute that such payments had been made.

Further, inasmuch as [lender] also established that the partial payment exception applied to Marlene …, we agree with [lender]’s contention on its appeal that the court erred in granting the cross motion insofar as it sought summary judgment dismissing the complaint against Marlene …. [Thomas and Marlene] took title to the property in question as husband and wife without any restriction, and they thereupon became tenants by the entirety. In an estate by the entirety the husband and wife are each seized of the entire estate, per tout et non per my. Each owns, not an undivided part, but the whole estate. Thus, any payments made by Thomas … that inured to Marlene[‘s] … benefit were implicitly authorized by Marlene … and worked to renew the statute of limitations as to both [Thomas and Marlene].  (Citations, ellipses, internal quotation marks and brackets omitted; emphasis in original.)


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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