REVIVE A TIME-BARRED CLAIM USING § 17-101 OF NEW YORK’S GENERAL OBLIGATIONS LAWPrint Article
- Posted on: Feb 28 2020
In general, statutes of limitation govern the time in which a cause of action must be interposed after accrual. [This BLOG has previously addressed Statute of Limitations issues [HERE] and [HERE].] Article 2 of the CPLR addresses statute of limitations issues in New York. Section 201 of the CPLR provides that “[a]n action … must be commenced within the time specified in this article unless a different time is prescribed by law or a shorter time is prescribed by written agreement. No court shall extend the time limited by law for the commencement of an action.” Prior to the enactment of the statutes of limitation “there was no fixed time for the bringing of an action [and p]ersonal actions were merely confined to the joint lifetimes of the parties.” Flanagan v. Mount Eden General Hospital, 24 N.Y.2d 427, 429) (1969). “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, 24 N.Y.2d at 429 (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). The Connell Court further stated that:
These policies [upon which Statutes of Limitation are based] are briefly reviewed in Note: Federal Rule of Civil Procedure 15(c): Relation Back of Amendments (57 Minnesota L.Rev. 83, 84–85), as follows:
“First, the primary purpose of the statute is to compel the exercise of a right of action within a reasonable time so that a defendant will have a fair opportunity to prepare an adequate defense. Otherwise, the belated institution of an action might prejudice defendant’s preparation of evidence. Such prejudice would commonly result, for example, where critical evidence is lost or where the facts have been obscured by the passage of time or faulty memories. The death or removal from the jurisdiction of witnesses is a further problem. Second, the statute relieves the defendant from the otherwise endless psychological fear of litigation based upon events in the distant past. Third, it frees the judicial system from stale claims which make resolution of fact issues both difficult and arbitrary. Fourth, the courts are relieved of the additional caseload which would result if old causes of action were permitted, thus promoting efficient judicial administration. Finally, a limitations period avoids the disruptive effect of unsettled claims upon commercial intercourse. For example, creditors may more accurately determine a person’s financial status if his former outstanding debts have been extinguished by the running of the statute of limitations.”
Connell, 83 A.D.2d at 40 – 41.
Some of the problems that Statutes of Limitation are designed to address, however, may be ameliorated by § 17-101 of New York’s General Obligations Law, which provides 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. This section does not alter the effect of a payment of principal or interest.”
In New York the Statute of Limitations for actions on, inter alia, a contract, a note secured by a mortgage or a mortgage, is six years. CPLR 213. If, however, a debtor, inter alia, acknowledges a debt under certain circumstances, a “stale” claim relating to such debt may be revived. “There are two ways in which the statute of limitations may be tolled. One involves part payment of the debt and the other a signed acknowledgment. Erdheim v. Gelfman, 303 A.D.2d 714, 714 – 15 (2nd Dep’t 2003). As to the former, the Erdheim Court, quoting Lew Morris Demolition Co. v. Board of Educ., 40 N.Y.2d 516, 521 (1976), stated that tolling may occur if “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.” Erdheim, 303 A.D.2d at 715. As to the latter, the Erdheim Court, again quoting Lew Morris, stated that “[a]s to a written acknowledgment, pursuant to General Obligations Law § 17-101, the statute of limitations will be tolled by a signed written acknowledgment of an existing debt which contains nothing inconsistent with an intention on the part of the debtor to pay it.” Erdheim, 303 A.D.2d at 715.
In order for a writing to satisfy the requirements of GOL § 17-101, it “must be signed and recognize an existing debt and must contain nothing inconsistent with an intention on the part of the debtor to pay it.” Yadegar v. Deutsche Bank Nat. Trust Co., 164 A.D.3d 945 (2nd Dep’t 2018).
In Erdheim, plaintiff, a lawyer, sued defendant client for legal fees. Plaintiff missed the six-year statute of limitations to interpose a cause of action for account stated and quantum meruit (both six years). However, plaintiff and defendant had a conversation prior to the running of the statute of limitations in which defendant acknowledged the debt. Plaintiff urged, inter alia, that a written transcription of that conversation was a sufficient writing under GOL § 17-101 to toll the statute of limitations. The Erdheim Court disagreed and stated:
Assuming that the subject discussion included an admission of a debt by the defendant and that the transcription was signed by him within the required period, the only thing he has thereby acknowledged is that the 1991 discussion took place and that the transcript is a true representation of the tape of that discussion. The fact that in 1991 the defendant believed he might owe the plaintiff some unagreed-upon amount of money after their debts were adjusted, does not show that at the time he signed the transcript he still believed a debt existed.
Erdheim, 303 A.D.2d at 715 – 16.
In Yadegar, the Court found that a letter accompanying a “short sale” request was not sufficient under GOL § 17-101 because same was not an “unqualified acknowledgement of the debt sufficient to reset the statute of limitations” because “plaintiff’s letter, while arguably acknowledging the existence of the mortgage, disclaimed any intent to pay it with the plaintiff’s own funds.” Yadegar, 164 A.D.3d at 948.
In Banco Do Brasil, S.A. v. State of Antigua and Barbuda, 268 A.D.2d 75 (1st Dep’t 2000), the plaintiff sued defendant for breach of a loan agreement more than 6 years after default. “The IAS court denied defendants’ motion to dismiss and concluded that the six-year Statute of Limitations was revived under General Obligations Law § 17–101, because the 1997 letter constituted a plain admission of indebtedness and nothing in the letter was inconsistent with a clear intent to repay the loan. Banco Do Brasil, 268 A.D.2d at 77. In so doing, the First Department stated:
In its entirety, such letter refers to the parties’ 1981 loan agreement and then “confirms” four “balances”, namely, the original loan amount, accrued interest, past due interest, and, adding up the first three balances, the “total amount”. Even if this recital of a repayment obligation that is current and increasing with time is something less than a new promise to pay a past due debt, it clearly conveys and is consistent with an intention to pay, which is all that need be shown in order to satisfy section 17-101 GEN. OBLIG.
Banco Do Brasil, 268 A.D.2d at 77 (citations omitted).
Nationstar Mortgage, LLC v. Dorsin
In Nationstar Mortgage, LLC v. Dorsin, decided by the Appellate Division, Second Department, on February 26, 2020, the Court addressed General Obligations Law § 17–101. In Dorsin, defendant borrowed money from lender and secured the obligation with a mortgage on real property. In October of 2009, as a result of borrower’s default, lender commenced action to foreclose the mortgage (the “First Action”) at which the debt was deemed accelerated. The acceleration commenced the running of the statute of limitations.
The First Foreclosure Action was dismissed, without prejudice, on February 25, 2015. Lender commenced another foreclosure action on October 29, 2015 (the “Second Foreclosure Action”).
In her answer, borrower interposed a counterclaim to cancel and discharge the mortgage, of record, pursuant to RPAPL 1501(4). [A topic previously treated by this BLOG [HERE]]. Lender moved for summary judgment (which was granted) and borrower cross-moved for summary judgment dismissing the complaint as time barred and under RPAPL 1501(4) (which was denied). The Second Department reversed.
The Dorsin Court noted that the Second Action was commenced more than 6 years after the underlying debt was accelerated. Lender, however, contended that “defendant’s execution of a Home Affordable Modification Trial Period Plan (hereinafter the Plan) after commencement of the [First Action], as well as payments made pursuant to that Plan, served to renew the running of the statute of limitations, thus making this action timely, as it was commenced less than six years after the Plan was executed and the payments made.” The Dorsin Court reiterated that “[i]n order to demonstrate that the statute of limitations has been renewed by a partial payment, it must be shown that the payment was 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.” (Citations and internal quotation marks omitted.)
In determining that lender failed to satisfy the requirements of GOL § 17–101, the Dorsin Court found:
While the writing arguably acknowledged the existence of indebtedness, the defendant merely agreed to make three trial payments so as to receive a permanent modification offer. Any intention to repay the debt was conditioned on the parties reaching a permanent modification agreement, which condition did not occur. Under these circumstances, it cannot be said that the writing contained nothing inconsistent with an intention on the part of the debtor to pay the debt. Indeed, the defendant represented in the Plan that he was unable to afford the mortgage payments.
(Citations and internal quotation marks omitted.)