Commercial Division Blog
Written Acknowledgement of Debt Revives Statute of Limitations
On December 2, 2020, the Second Department issued a decision in Commodore Factors Corp. v. Deutsche Bank Natl. Trust Co., 2020 NY Slip Op. 07160, holding that a written acknowledgement of a debt revives a time-barred claim, explaining:
An action to foreclose a mortgage is governed by a six-year statute of limitations. Even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the statute of limitations begins to run on the entire debt.
General Obligations Law § 17-101 effectively revives a time-barred claim when the debtor has signed a writing which validly acknowledges the debt. To constitute a valid acknowledgment, a writing 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.
Here, Deutsche Bank established its prima facie entitlement to judgment as a matter of law dismissing the first cause of action, which sought to cancel and discharge of record its mortgage on the subject property. Even assuming that the statute of limitations to foreclose on Deutsche Bank's mortgage would have expired sometime in 2014, Deutsche Bank demonstrated that the borrowers subsequently executed the lien modification agreement. That agreement provides, among other things, that even though the borrowers' personal liability on the note is discharged, the terms of the original Lien Documents remain in effect, and the Lien Holder continues to have an enforceable lien on the Property. In addition, the lien modification agreement provides that the Lien Documents, as modified by this Agreement, are duly valid, binding agreements, enforceable in accordance with their terms and are hereby reaffirmed. Thus, the borrowers explicitly acknowledged their obligation to pay the existing debt to Deutsche Bank, and the language of the lien modification agreement was sufficient to revive the statute of limitations period.
In opposition, the plaintiff failed to raise a triable issue of fact. Contrary to the plaintiff's contention, the lien modification agreement contains nothing inconsistent with the borrowers' intention to make the mortgage payments. Although the lien modification agreement indicates that the borrowers' personal liability for the obligation was released in bankruptcy, a discharge in bankruptcy is a discharge from personal liability only and, without more, does not affect a lien.
(Internal quotations and citations omitted).
It is not unusual for the statute of limitations to be an issue in complex commercial litigation. Contact Schlam Stone & Dolan partner John Lundin at firstname.lastname@example.org if you or a client have questions regarding whether claims are barred by the statute of limitations.