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Court of Appeal: extension or reconstitution requires a written promise from the debtor rather than a simple acknowledgment
A recurring problem in New York mortgages is under what circumstances the state’s six-year statute of limitations on mortgage debt is extended or revived. The New York Court of Appeals recently ruled that this matter is governed by Section 17-105 of the General Obligations Act (GOL), which requires a written promise signed by the debtor to cancel or revive a mortgage debt, rather than the more general provision, GOL Section 17-101, which provides that a written acknowledgment of receipt of one debt is enough to revive other forms of debt. Batavia Townhouses, Ltd. vs. Council of Churches Housing Dev. Funds Co., Inc.—NE3d—-, 2022 WL 1631492 (NY 24 May 2022).
Over the years, some New York courts have mistakenly applied GOL Section 17-101 to mortgage debt. The Court of Appeal, in a previous decision, had analyzed a mortgage debt under the two provisions.
Petito v. Piffath, 85 NY2d 1 (1994). In its new decision, the Court of Appeal noted that Petito had not considered the threshold question of which section of the GOL applies in a mortgage foreclosure action.
Holland & Knight represented the debtor, Batavia Townhouses, in this case and argued that the validity of the mortgage debt was governed by Rule 17-105, rather than Rule 17-101. The lower court agreed and ruled in favor of the company’s client. New York’s Fourth Judicial Department upheld, becoming the first appellate court to explicitly address the issue. Batavia Townhouses, Ltd. vs. Council of Churches Housing Dev. Funds Co., Inc., 189 AD3d 20 (4th department 2020). The Court of Appeal has now upheld the Fourth Department’s decision.
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