There is certainly by now a widespread awareness that the running of the statute of limitations can, and does, defeat more than a few foreclosure actions. The perhaps anomalous result of that is the borrower keeping all the monies loaned and the lender recouping nothing. While sometimes the delay leading to such a draconian outcome may be attributable to the lender, on more than a few occasions it is not. Rather, the system imposes this under circumstances where many would find it more than dismaying.
But there is a savings provision in New York, that is CPLR §205, entitled “Termination of Action” which permits an action dismissed, which by the time of dismissal is by then barred by the statute of limitations, to be begun anew under certain circumstances. That is to say, it is not always available. This subject was addressed in our Alert of July 15, 2019, where the specific focus was a declaration that abandonment of a case leading to dismissal is not the same as neglect to prosecute – so the lender was permitted to start the action again. While this certainly seemed correct and well founded, it could also be viewed as a generous interpretation of the statute.
That was a 2018 case, but in 2019, the Court of Appeals addressed the overall interpretation of this very critical statute and meaningfully for a foreclosing plaintiff needing to invoke the benefits of CPLR §205, the Court analyzed the liberal nature of the provision. [See U.S. Bank National Association v. DLJ Mortgage Capital, Inc., 33 N.Y.3d 72, 122 N.E.3d 40, 98 N.Y.S.3d 523 (Ct.App. 2019)]. It is noted that the statute implements a policy preference of the legislature to determine actions on the merits. Moreover, because the statute is interpreted as remedial in nature, it is designed to permit plaintiffs to avoid the harsh consequences of imposition of the statute of limitations, allowing the claims to be adjudged on their merits – so long as the prior action itself had been timely brought, thereby placing defendants on notice of the claims.
Where this may be viewed in the vernacular as a close call, the court also warns that the statute’s “broad and liberal purpose is not to be frittered by any narrow construction.”
Interesting and helpful too, is the court’s interpretation of the statute’s effect as simple:
“if a timely brought action has been terminated for any reason other than one of the … reasons specified in the statute, the plaintiff may commence another action based on the same transactions or occurrences within six months of the dismissal of the first action, even if the second action would otherwise be subject to a Statute of Limitations defense, so long as the second action would have been timely had it been commenced when the first action was brought”
Finally as to the overall liberality of construction directed by New York’s highest court, by the very terms of the statute it becomes operative when an action has been terminated for some fatal flaw – but one unrelated the actual merits of the action; thus the statute is to be liberally construed.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2019), 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.