Not infrequently we are constrained to observe that an alert title may appear obscure, even though we try to avoid the recondite. That is so here. This sounds distant, but it is not; rather it is meaningful and practical, involving the intersection of an important statute of limitations issue and its effect upon a subsequent mortgagee. This is also quite meaningful to title insurers. It all arises from a current case: Yuzary v. WCP Wireless Lease Subsidiary LLC, 94 A.D.3d 679, 943 N.Y.S.2d 466 (1st Dept. 2012).
STATUTE OF LIMITATIONS ISSUE
The statute of limitations to begin an action to foreclose a mortgage is six years. Lenders and servicers would like to think that they would never wait six years to initiate a foreclosure so that this is all a non-issue. Repeated reported cases, however (dealt with in our alerts over the years) put the lie to this thought.
In any event, when faced with that six years, one way to extend the running of the statute of limitations is through a writing – either a formal agreement to extend or a letter signed by the borrower acknowledging the debt. [Extending the statute of limitations and all the nuance of the whole time bar subject are discussed at length at 1 Bergman on New York Mortgage Foreclosures §5.11, LexisNexis Matthew Bender (rev. 2012) for those interested in more detail.]
In the noted new case, a foreclosing lender produced such a letter asserting that it served to extend the statute upon a mortgage which would have otherwise expired some fourteen years previously. The genuineness of that document was disputed by the borrower claiming it was a forgery.
This was enough to defeat the mortgage holder’s motion for summary judgment. So far, the case is informative, if not new. But the more dramatic holding is the title question.
PRIORITY OF LATER MORTGAGE
When a prospective lender searches a title and finds a prior – old – mortgage, one which would have matured years ago, the question is always “is it alive?” If the six year statute of limitations has expired, as in the subject case, the new lender might feel safe. But, there might be a letter or agreement serving to toll the statute of limitations so that the earlier mortgage was still enforceable.
Here, though, is the key ruling. Even if the questionable letter was to be deemed valid, because it was never recorded, it could not be effective as against a subsequent mortgagee who, with no actual notice of that letter, is a bona fide encumbrancer. (The ruling cited RPL §291 and two other cases.)
While the letter might have been binding as between the earlier lender and the borrower, its lack of recording means that a later lender is protected.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.