The New York State Court of Appeals recently issued a joint opinion in four cases regarding the state’s six-year statute of limitations on foreclosure actions. Two of the four cases involved a question of when or if the note holder accelerated the debt after a default and therefore when the statute of limitations expired, except for the foreclosure claims of the note holders; the other two cases considered whether a valid election to expedite was revoked when the note holder voluntarily stayed the foreclosure action.
In one case, the court found that two prior complaints regarding the same modified mortgage, which had been dismissed because they concerned the original promissory note and mortgage rather than the modified versions, did not result in a valid loan acceleration. The court stated that “in these circumstances, where the deficiencies in the complaints were not merely technical or de minimis and made it unclear what debt was accelerating; the commencement of these actions did not validly accelerate the modified loan. “
The court found in the second case that a letter of default issued by the predecessor in the interest of the note holder was not “unequivocal enough to constitute a valid election to expedite” because it simply warned the borrower that foreclosure would occur in the future if the borrower did not. failing to cure the default, instead seeking immediate payment of the entire outstanding loan. The court reasoned that, based on legal precedent, “acceleration should not be considered to occur without a manifest and unequivocal act” on the part of the ticket holder.
Then, in the third and fourth cases, the court held that “when the maturity of the debt has been validly accelerated by the initiation of a foreclosure action, the voluntary withdrawal of that action by the holder of the note revokes the election to expedite, without the note holder’s contemporaneous declaration to the contrary. “In both cases, the note holder submitted a voluntary stipulation to discontinue the foreclosure action, but did not expressly mention the slowdown or willingness to accept installment payments. The court determined that this stipulation constituted an affirmative act of revocation as a matter of law because a “voluntary suspension withdraws the complaint and, when the complaint is the only expression of a demand for immediate payment of the entire debt, this is the equivalent functional of a statement from the lender that the acceleration is revoked. “
Finally, in the first case, the court also held that a lender is not necessarily “prevented from revoking the acceleration if the reason for the revocation was to avoid the expiration of the statute of limitations for the accelerated debt. The motivation of a bondholder to exercise a contractual right is generally irrelevant. “