New York Appellate Court Holds Short Sale Documents Do Not Constitute an Acknowledgment of the Debt to Restart the Statute of Limitations

By: Wayne StreibichDiana M. Eng, Jonathan M. Robbin, and Andrea M. Roberts

On August 29, 2018, New York’s Appellate Division, Second Department, issued two decisions holding that documents submitted by a borrower in connection with an attempted short sale of the property did not constitute an acknowledgment of debt under New York General Obligations Law § 17-101 (“GOL § 17-101”). In Karpa Realty Group, LLC v. Deutsche Bank Nat’l Trust Co., 2018 WL 4101011 (2d Dept. Aug. 29, 2018), the Second Department affirmed the Kings County Court’s decision granting plaintiff Karpa Realty Group, LLC’s motion for summary judgment and denying defendant Deutsche Bank National Trust Company’s cross-motion for summary judgment to dismiss Karpa Realty’s quiet title complaint. Deutsche Bank argued that the statute of limitations to foreclose had not expired because the borrower submitted a written hardship letter in connection with his short sale application, acknowledging the debt under GOL § 17-101, thus renewing the statute of limitations. The Second Department held the letter “did not constitute an unqualified acknowledgment of the debt or manifest a promise to repay the debt sufficient to reset the running of the statute of limitations.” Id. at *2.

Please click here for the full client alert.