222 A.D.3d 1
N.Y. App. Div.2023Background
- 2006: DeMatteis executed a note secured by a mortgage on Ossining property. In 2012 he deeded the property to Hunter Street Properties, LLC (Hunter).
- 2014: BONY Mellon commenced a foreclosure action that elected to accelerate the entire debt; that action was later dismissed (against Hunter for lack of personal jurisdiction; against DeMatteis for failure to prosecute).
- Oct. 20, 2020: DeMatteis filed a Chapter 7 petition in Arizona and stated he did not own any real property; he received a discharge on Feb. 2, 2021 and the case closed Feb. 11, 2021.
- Apr. 8, 2021: Plaintiff (BONY Mellon successor) filed the present foreclosure action against DeMatteis and Hunter. Defendants moved to dismiss under CPLR 3211(a)(5) as time‑barred.
- Plaintiff argued tolling from (1) NY COVID‑19 executive orders (Mar 20–Nov 3, 2020) and (2) the automatic bankruptcy stay under 11 U.S.C. § 362. Supreme Court denied dismissal; Appellate Division modified to dismiss claims against Hunter but affirmed denial as to DeMatteis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the automatic bankruptcy stay tolls the statute of limitations for commencing a mortgage foreclosure action against a debtor who no longer owned the property at the time of filing | The stay under 11 U.S.C. § 362(a)(1) is a statutory prohibition under CPLR 204(a) and therefore tolls the limitations period as to DeMatteis despite he had transferred title years earlier | The stay does not apply because DeMatteis had no ownership interest in the property when he filed bankruptcy | Held: § 362(a)(1) tolled the limitations period as to DeMatteis; naming the debtor triggers the stay regardless of record title; the stay ran Oct. 20, 2020–Feb. 2, 2021, making the Apr. 8, 2021 suit timely as to DeMatteis |
| Whether the automatic bankruptcy stay tolled the statute of limitations as to a nondebtor transferee (Hunter) | The bankruptcy stay applied because the subject property should be treated as property of the bankruptcy estate, so tolling also runs against Hunter | The stay does not protect nondebtors and DeMatteis had no legal or equitable interest in the property at the petition date; Hunter was a nondebtor owner of record | Held: Plaintiff failed to raise a question of fact that the property was part of the estate or that circumstances warranted extending the stay to the nondebtor; the suit was untimely as to Hunter |
| Effect of the 2014 foreclosure (acceleration) on the limitations period under CPLR 213(4) and FAPA | Plaintiff attempted to avoid the preclusion by relying on tolls (COVID orders and bankruptcy stay) | Defendants asserted the 2014 complaint accelerated the debt and started the six‑year limitations period | Held: The 2014 complaint validly accelerated the debt; under FAPA the plaintiff is estopped from denying acceleration because the prior action was not dismissed on an express judicial finding that acceleration was invalid |
Key Cases Cited
- Lubonty v. U.S. Bank N.A., 34 N.Y.3d 250 (N.Y.) (§ 362(a)(1) bars commencement or continuation against a debtor and operates as a blanket ban)
- In re Fogarty, 39 F.4th 62 (2d Cir.) (bright‑line rule: if debtor is a named party, automatic stay applies)
- Queenie, Ltd. v. Nygard Int’l, 321 F.3d 282 (2d Cir.) (stay may extend to nondebtors when claim will have immediate adverse economic consequence on estate)
- In re Colonial Realty Co., 980 F.2d 125 (2d Cir.) (discusses § 362(a)(1) categories and estate recovery of fraudulently transferred property)
- In re Geris, 973 F.2d 318 (4th Cir.) (debtor’s contingent interest in value of third‑party collateral does not make that collateral property of the estate)
- Butner v. United States, 440 U.S. 48 (U.S.) (property interests are created by state law; bankruptcy law defines what interests become estate property)
- GMAT Legal Title Trust 2014‑1 v. Kator, 213 A.D.3d 915 (App. Div.) (application of FAPA/CPLR 213(4) re acceleration and estoppel)
- HSBC Bank USA, N.A. v. Francis, 214 A.D.3d 58 (App. Div.) (standard for CPLR 3211(a)(5) statute‑of‑limitations dismissal)