Batavia Townhouses, Ltd. v. Council of Churches Hous. Dev. Fund Co., Inc., 2022 NY Slip Op 3361 - NY: Court of Appeals 2022:
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In May 2019, the limited partners brought this derivative action, on behalf of the Partnership, against Council seeking a declaration that the wraparound mortgage was unenforceable because the six-year limitations period for foreclosure had expired in March 2018. Council responded 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 to 2018 listed the mortgage as an outstanding liability. Section 17-101 provides that an "acknowledgment" of a contractual debt is "competent evidence of a new or continuing contract" that tolls the limitations period for commencing actions "other than an action for the recovery of real property." Section 17-105(1) states, "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, among other things, granted plaintiffs' motion for summary judgment seeking to cancel and discharge the wraparound mortgage. As is pertinent, the court ruled that the action to foreclose on the mortgage was time barred pursuant to CPLR 213 (4) and the six-year statute of limitations was not tolled or revived under General Obligations Law § 17-105.
The Appellate Division modified the Supreme Court order insofar as appealed from by remitting the matter to Supreme Court for the grant of an appropriate judgment declaring the rights of the parties and otherwise affirmed. The court agreed with Supreme Court 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" (189 AD3d 20, 25 [2021]). The Court reached that conclusion based on the "plain language" and legislative history of sections 17-101 and 17-105 (id. at 25-26). 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" (id.). 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" (id. at 28). We granted leave to appeal (36 NY3d 906 [2021]), and we now affirm.
In pertinent part, RPAPL § 1501(4) provides as follows:
"Where the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage, or to enforce a vendor's lien, has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action against any other person or persons, known or unknown, including one under disability as hereinafter specified, to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom" (RPAPL § 1501[4] [emphasis added]).
Thus, a party seeking to cancel or discharge a mortgage must first establish that the limitations period for enforcement by way of foreclosure has already expired. Here, it is undisputed that the six-year statute of limitations to foreclose on Birchwood expired on March 2, 2018, pursuant to CPLR 213(4), unless it was extended or revived by one of the means set forth in either General Obligations Law §§ 17-101 or 17-105. The question we must answer is whether both or only one of those sections of the General Obligations Law applies here.
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."
Council further argues that General Obligations Law §§ 17-101 and 17-105 both apply to mortgage foreclosure actions based on this Court's precedent in Petito v Piffath (85 NY2d 1 [1994]), in which we considered both statutes in concluding that a time-barred foreclosure had not been revived. However, Petito is distinguishable from the present case because the record in that case reveals that, unlike the present case, the parties did not present this Court with the threshold question of which section of the General Obligations Law applied in a mortgage foreclosure action.
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 (189 AD3d at 28).[1]
Council seeks, however, to draw a distinction between an "express promise" and General Obligations Law § 17-105(1)'s requirement of a "promise . . . made . . . by the express terms of a writing." According to Council, a mere acknowledgment meets that requirement. Section 17-105(1), however, does not use the word "acknowledgement," and it instead refers to a "promise" or "waiver" made "by the express terms of a writing." The logical reading is that, whereas section 17-101 allows for a written and signed "acknowledgement [of] or promise" to pay a contractual obligation to toll or revive the statute of limitations, section 17-105(1) requires the mortgage debtor to make an "express" "promise to pay the mortgage debt." To instead construe the word "promise" to refer both to an "acknowledgement" and a "promise" would render meaningless the distinction between an "acknowledgment or a promise" made in section 17-101. Treating an "acknowledgment" as being something different than a "promise" abides by the rule of statutory construction that "[w]hen different terms are used in various parts of a statute or rule, it is reasonable to assume that a distinction between them is intended" (Matter of Albano v Kirby, 36 NY2d 526, 530 [1975]). Additionally, section 17-105(4)'s statement that outside of the provisions of that section "no acknowledgment, waiver or promise has any effect to extend the time" indicates that the legislature didn't intend for a mere acknowledgment to revive or toll the statute of limitations for a foreclosure action.
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. Council's remaining arguments are lacking in merit.[2]
Accordingly, the order of the Appellate Division should be affirmed, with costs.
[1] Because we conclude that General Obligations Law § 17-105(1) governs the tolling or revival of the statute of limitations for an action pursuant to RPAPL § 1501(4), we have no occasion to decide whether the Partnership's delivery of its financial statements and tax returns to Council constituted "acknowledgment[s]" under General Obligations Law § 17-101.
[2] The partial dissent's analysis addresses arguments that were neither preserved for review by any party nor raised in this Court (see Misicki v Caradonna, 12 NY3d 511, 518-520 [2009]). Although the parties dispute which tolling provisions apply (and what they require), there is no suggestion that the note and mortgage could or should be treated separately for tolling purposes. Indeed, in its brief, Council repeatedly suggests just the opposite, directing its tolling arguments to the enforceability of "the WrapAround Note and Mortgage," also referred to as the "mortgage obligation" (App Br at 11, 26, 29). Council does not contend that a triable issue of fact precluded summary judgment but, to the contrary, noted that the parties "agreed that the matter is appropriate for resolution by summary judgment" (App Br at 11)."
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