New York Appellate Court Rejects Usage of a Mortgage’s Reinstatement Provision as a Defense to the Expiration of the Statute of Limitations
New York’s Second Department, in rejecting the MacPherson line of cases, recently held that a mortgage’s reinstatement provision is not a condition precedent to accelerating the debt and therefore does not prevent a lender from exercising its option to accelerate. Thus, in litigations within the Second Department, lenders and mortgage servicers can no longer rely on the reinstatement provision to argue that the statute of limitations to fore-close was not triggered.1 The authors of this article explain the decision.
In a case of ﬁrst impression, New York’s Appellate Division, Second Department (“Second Department”) issued a decision holding the reinstatement provision of a mortgage does not prevent the acceleration of the loan prior to entry of a foreclosure judgment. In Bank of New York Mellon v. Dieudonne,2 the Second Department afﬁrmed the Kings County Supreme Court’s decision granting defendant Dieudonne’s motion to dismiss the complaint pursuant to CPLR 3211(a)(5) because the foreclosure action was barred by the expiration of the statute of limitations. Speciﬁcally, the Second Department held that “the extinguishment of the defendant’s contractual right to de-accelerate the maturity of the debt pursuant to the reinstatement provision of paragraph 19 of the mortgage was not a condition precedent to the plaintiff’s acceleration of the mortgage” and, therefore, acceleration occurred upon commencement of the prior foreclosure action.
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“New York Appellate Court Rejects Usage of a Mortgage’s Reinstatement Provision as a Defense to the Expiration of the Statute of Limitations,” by Wayne Streibich, Diana M. Eng, Jonathan M. Robbin, and Andrea M. Roberts was published in the Summer 2019 edition of the Real Estate Finance Journal, a Thomson Reuters publication. Reprinted with permission.
This article was first published as a Blank Rome Consumer Finance Litigation Alert in March 2019.