XIV. Statute of Limitations Applicable To Mortgages

• Jurisdiction: New York

XIV. Statute of Limitations Applicable to Mortgages

While as a practical matter the applicability of the statute of limitations to mortgage obligations should not be pervasive, it is relevant. Because a mortgage is, indeed, a contract,²⁵⁷ reference for statute of limitations purposes should be made to CPLR 213, well-recognized as the statute applicable to contracts.

In relevant part, § 213 provides:

The following actions must be commenced within six years:

. . .

4. an action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein.

It is clear, therefore, that the period of limitation applicable to a mortgage is six years. Less apparent is the practical application of the statute.

Appreciating the significance of the statute of limitations as it relates to mortgages requires brief reference to some basics. As always, assuming failure to pay as the nature of the breach (there could be others), the mere existence of a default means only that such payment is overdue. Until a mortgagee manifests an election to accelerate, the remainder of the sums due pursuant to the mortgage will not have matured.

Consequently, the impact of the statute of limitations of six years is not quite as significant as it might first appear. Clearly, an action based upon installments more than six years old is barred.²⁵⁸ However, the statute does not bar the principal sum due on a mortgage that matured within six years of instituting the action.²⁵⁹ Stated another way, even if the first default is more than six years old, the action can still be maintained for those payments falling due within the six years prior to bringing the action. The theory is that an action can be brought on each installment as it matures or becomes due.²⁶⁰ An alternate formulation of the point holds that the statute of limitations runs not from the date of the last payments of principal and interest, but from the date the installment payments were due.²⁶¹ Still another semantic view is that, when a mortgage requires the payment of installments at fixed times, the statute of limitations begins to run when the installment becomes due, and it is not tolled to the maturity of the mortgage.²⁶²

Of some significance is the distinction between principal and interest. While suit on a principal installment more than six years old is barred, interest accruing on that principal within the six-year period remains recoverable.²⁶³

The next point to consider is the critical aspect of acceleration. Once a lender opts to accelerate, each subsequent payment that would otherwise have been due in sequence cannot start a new period of limitation. Therefore, any action instituted within six years of acceleration encompasses all sums that would have become due after acceleration. Any payments due before acceleration that are more than six years overdue would be barred.²⁶⁴

Significantly, the mere availability of the option to accelerate, without its exercise, does not serve either to suspend the running of the statute of limitations indefinitely in the plaintiff's favor or to accelerate the running thereof to the defendant's advantage.²⁶⁵ Stated in other terms, the acceleration clause exists solely for the benefit of the mortgagee.²⁶⁶ Moreover, without election, there is no acceleration of the mortgage debt, and the mortgagee may effectively bring a foreclosure action only if the last installment remains unbarred by the statute of limitations.²⁶⁷

Additionally, both mortgagor and mortgagee should be aware that the statute can, indeed, be tolled, suspended, arrested or revived.²⁶⁸ This, in turn, requires reference to both case law and statute, the former of somewhat less applicability with the passage of GOL §§ 17-105 to 17-107. According to case law, the statute can be tolled by a writing. To be effective, the writing must acknowledge the mortgage debt and expressly promise or necessarily imply repayment.²⁶⁹ While the writing can be formal, letters can suffice,²⁷⁰ and a writing containing the requisites starts the statute running anew from that point.²⁷¹

Partial payment of a debt otherwise outlawed by the statute of limitations, if made under circumstances from which a promise to honor the obligation may be inferred, will also effectively begin the statute running from the date of such payment.²⁷² A like formulation is that the payment will toll the running of the statute only when made under such circumstances as to constitute an admission of the obligation by the debtor and justify at least an implied promise to pay the balance of the obligation. To be effective, these payments must have been made either by the party against whom liability is asserted or by his or her authorized agent.²⁷³ A payment in kind can also suffice under appropriate circumstances,²⁷⁴ and payment of interest alone, no matter how small, has the same effect.²⁷⁵

There are, however, a number of fine points to be addressed here, such as ambiguities when more than one debt is...