Lubonty v. U.S. Bank Nat'l Ass'n

Citation139 N.E.3d 1222,34 N.Y.3d 250,116 N.Y.S.3d 642
Decision Date25 November 2019
Docket NumberNo. 85,85
Parties Gregg LUBONTY, Appellant, v. U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee for American Home Mortgage Investment Trust 2005-4A, et al., Respondent.
CourtNew York Court of Appeals

34 N.Y.3d 250
139 N.E.3d 1222
116 N.Y.S.3d 642

Gregg LUBONTY, Appellant,
v.
U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee for American Home Mortgage Investment Trust 2005-4A, et al., Respondent.

No. 85

Court of Appeals of New York.

November 25, 2019


OPINION OF THE COURT

GARCIA, J.

116 N.Y.S.3d 643
139 N.E.3d 1223
34 N.Y.3d 252

New York law tolls the statute of limitations where "the commencement of an action has been stayed by a court or by statutory prohibition" ( CPLR 204[a] ). Federal bankruptcy law automatically stays the commencement or continuation of any judicial proceedings against a debtor upon the filing of a bankruptcy petition (see 11 USC § 362 [a] ). We must determine whether the bankruptcy stay qualifies as a "statutory prohibition"

34 N.Y.3d 253

under CPLR 204(a), and, if so, whether a party may later avail itself of the toll where, at the time the stay was imposed, that party had a pending action asserting the same claim. For the reasons set forth below, we answer yes to both questions, and affirm the order of the Appellate Division.

I.

The relevant procedural history spans two foreclosure actions, two bankruptcy petitions, and the instant action to cancel and discharge the mortgage. In 2005, plaintiff Gregg Lubonty took out a $2.5 million mortgage on a property in Southampton, New York. Less than two years later, he defaulted on his mortgage payments. On June 11, 2007, defendant U.S. Bank National Association's predecessor in interest, American Home Mortgage Acceptance, Inc. (AHMA), accelerated plaintiff's mortgage and commenced a foreclosure action. For purposes of this appeal, we assume that at this point the six-year statute of limitations on the foreclosure claim was triggered (see CPLR 213[4] ). Just two weeks later, before his answer in the first foreclosure action was due, plaintiff filed a bankruptcy petition in federal court invoking the automatic stay and barring continuation of the first foreclosure action. On November 24, 2009, approximately 882 days after initially filing, plaintiff voluntarily dismissed the first bankruptcy action and the stay was lifted. On January 14, 2010, AHMA filed for default judgment in the first foreclosure action. On September 27, 2010, the trial court granted plaintiff's ex parte application to dismiss the action as abandoned.1

Subsequently, AHMA assigned plaintiff's mortgage to defendant and in June 2011 defendant commenced a foreclosure action. On September 30, 2011, plaintiff moved to dismiss the second foreclosure action for improper service. Before the return date on that motion, however, plaintiff once again filed for bankruptcy, and an automatic bankruptcy stay was again imposed, prohibiting continuation of the second foreclosure action for 769 days.

34 N.Y.3d 254

On November 26, 2013, the bankruptcy court ordered the property and three other properties, with a combined market value of approximately $11 million, released to plaintiff from the bankruptcy

116 N.Y.S.3d 644
139 N.E.3d 1224

estate in return for two payments totaling $25,000. On April 8, 2014, the bankruptcy trustee notified the court in the second foreclosure action that the stay was no longer in effect. The stay of the second foreclosure action was lifted.2 Plaintiff's motion to dismiss for improper service was still pending and defendant filed its opposition on June 2, 2014, the day after plaintiff made the final payment releasing the property from his bankruptcy estate. Plaintiff replied on June 12, 2014. On October 21, 2014, the court dismissed the second foreclosure action for improper service of process.3

Two weeks later, plaintiff filed the instant action under Real Property Actions and Proceedings Law (RPAPL) § 1501(4) to discharge the mortgage, asserting that the statute of limitations on defendant's foreclosure claim had expired.4 Defendant moved to dismiss the action arguing that the statute of limitations on its foreclosure claim had not, in fact, expired because it was tolled while the bankruptcy stay was in effect.

Supreme Court dismissed, agreeing with defendant that "[u]nder [the provisions of CPLR 204(a) and 11 USC § 362(a)(1) ], the applicable statute of limitations is tolled for the period of time during which a stay or prohibition is in effect." The Appellate Division unanimously affirmed, concluding that "plaintiff's contention that CPLR 204(a) does not apply here because the earlier foreclosure actions had already been commenced when the petitions in bankruptcy were filed is without merit" ( Lubonty , 159 A.D.3d at 964, 74 N.Y.S.3d 279 ). Applying CPLR 204(a), the

34 N.Y.3d 255

Appellate Division determined that the statute of limitations for defendant's foreclosure claim was extended until December 2017 (id. ). This Court granted plaintiff leave to appeal.5

II.

Whether the automatic bankruptcy stay constitutes a "statutory prohibition" under CPLR 204(a) is an issue of first impression for this Court. The issue need not detain us long. The bankruptcy stay provision expressly prohibits the "commencement or continuation" of any covered action ( 11 USC § 362 [a][1] )—it is a blanket ban on filing or continuing lawsuits against the debtor (see infra at 258, 116 N.Y.S.3d at 646–47, 139 N.E.3d at 1226–27). It is true that an aggrieved party may seek relief from the automatic stay by application to the bankruptcy court (see 11 USC § 362 [d] ). But the need to seek

116 N.Y.S.3d 645

judicial relief from the automatic stay

139 N.E.3d 1225

means the creditor is otherwise prohibited from proceeding, and there is no guarantee that the bankruptcy court will favorably exercise its discretion (see id. § 362 [d][1] ). It is therefore clear that section 362(a) is a "statutory prohibition" within the plain meaning of CPLR 204(a).

III.

The issue then becomes whether the toll provided in CPLR 204(a) is available to a claimant who, when the bankruptcy stay was imposed, had already commenced an action against the debtor—later dismissed—on the claim now reasserted. In interpreting this statute, our goal is to give force to the intent of the Legislature and we therefore begin with the plain text—"the clearest indicator of legislative intent" ( Majewski v. Broadalbin–Perth Cent. Sch. Dist. , 91 N.Y.2d 577, 583, 673 N.Y.S.2d 966, 696 N.E.2d 978 [1998] ). In a manner consistent with the text, we may look to the purpose of the enactment and the objectives of the Legislature (see Albano v. Kirby , 36 N.Y.2d 526, 530–531, 369 N.Y.S.2d 655, 330 N.E.2d 615 [1975] ). We must also "interpret a statute so as to avoid an unreasonable or absurd application of the law" ( People v. Garson , 6 N.Y.3d 604, 614, 815 N.Y.S.2d 887, 848 N.E.2d 1264 [2006] [internal quotation marks omitted], citing People v. Santi , 3 N.Y.3d 234, 244, 785 N.Y.S.2d 405, 818 N.E.2d 1146 [2004] ). Applying those principles here, plaintiff's cramped reading of CPLR 204(a), one that produces inequitable and potentially absurd results, must be rejected.

34 N.Y.3d 256

A.

CPLR 204(a) provides, "[w]here the commencement of an action has been stayed by a court or by statutory prohibition, the duration of the stay is not a part of the time within which the action must be commenced." The result here depends on our reading of the term "commencement."

Plaintiff argues that it is impossible for defendant to have been prohibited from "commencing" an action because a foreclosure action had been commenced prior to plaintiff's bankruptcy filing. Application of plaintiff's rule would be as follows: Because defendant filed the first foreclosure claim and defendant responded by filing a bankruptcy petition, invoking the automatic stay, commencement of that first action was not "stayed" under the statute and the toll is inapplicable. And when defendant filed a second foreclosure action, and plaintiff again responded by again filing a bankruptcy petition that invoked the automatic stay, "commencement" of that second action was not stayed, once again making the toll inapplicable (see dissenting op. at 263, 116 N.Y.S.3d at 650–51, 139 N.E.3d at 1230–31). As a result, the six-year statute of limitations would have expired on June 11, 2013—a time when the bankruptcy stay was in effect prohibiting any action against plaintiff. Plaintiff's brand of literalism quickly loses sight of the forest for the trees, producing an outcome antagonistic to the purpose and design of the tolling provision (see New York Trust Co. v. Commr. of Internal Revenue , 68 F.2d 19, 20 [2d Cir. 1933] [Hand, J.] ). That interpretation must be rejected.

Neither this Court nor the Legislature has restricted the term "commencement" to the first time a party files a complaint asserting a cause of action; instead the term may also...

To continue reading

Request your trial
72 cases
  • Alvarez v. Annucci
    • United States
    • New York Court of Appeals
    • March 22, 2022
    ...Westchester County Corr. Facility, 36 N.Y.3d 251, 262, 140 N.Y.S.3d 170, 163 N.E.3d 1087 [2020], quoting Lubonty v. U.S. Bank N.A., 34 N.Y.3d 250, 255, 116 N.Y.S.3d 642, 139 N.E.3d 1222 [2019] ). Reading the statute as written neither defeats SARA's purpose nor produces absurd results. SARA......
  • Freedom Mortg. Corp. v. Engel
    • United States
    • New York Court of Appeals
    • February 18, 2021
    ...CPLR 213(4), a mortgage foreclosure claim is governed by a six-year statute of limitations (see 37 N.Y.3d 20 Lubonty v. U.S. Bank N. A., 34 N.Y.3d 250, 261, 116 N.Y.S.3d 642, 139 N.E.3d 1222 [2019] )—in each case, the timeliness dispute turns on whether or when the noteholders exercised cer......
  • Alvarez v. Annucci
    • United States
    • New York Court of Appeals
    • March 22, 2022
    ...Westchester County Corr. Facility, 36 N.Y.3d 251, 262, 140 N.Y.S.3d 170, 163 N.E.3d 1087 [2020], quoting Lubonty v. U.S. Bank N.A., 34 N.Y.3d 250, 255, 116 N.Y.S.3d 642, 139 N.E.3d 1222 [2019] ). Reading the statute as written neither defeats SARA's purpose nor produces absurd results. SARA......
  • Freedom Mortg. Corp. v. Engel
    • United States
    • New York Court of Appeals
    • February 18, 2021
    ...CPLR 213(4), a mortgage foreclosure claim is governed by a six-year statute of limitations (see 37 N.Y.3d 20 Lubonty v. U.S. Bank N. A., 34 N.Y.3d 250, 261, 116 N.Y.S.3d 642, 139 N.E.3d 1222 [2019] )—in each case, the timeliness dispute turns on whether or when the noteholders exercised cer......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT