One of the Bedrocks of Real Estate Transfers: The Statute of Limitations Cannot Be Extended By State Courts in New York
In their article, Adam Leitman Bailey and Jeffrey Metz discuss how, in New York, courts generally lack the authority to extend statutes of limitations, with only narrow exceptions permitting tolling which reinforces the importance of timely legal action in real estate matters.
Real estate markets require certainty. Lenders, developers, and all real estate actors require certainty to trust the market to make intelligent decisions and rely on these decisions and be able to sell these decisions to investors and the public at large.
Market parties from the largest lender to the first-time home buyer all rely on our courts, indirectly, when giving out a loan to make a purchase—that the law will be followed so their investments will be as safe as possible.
Rash or harmful legislative decisions, such as the State Legislature has signed by the Governor in July of 2019, have resulted in incredible monetary losses and harm to both landlords and tenants, and countless jobs lost for workers.
Thankfully, the New York Courts, from the local villages to the Court of Appeals, have upheld the law, and New York has been able to survive such an onslaught and many business persons continue to revitalize New York real estate.
On very few occasions in the past year, one of the most sacrosanct laws, the Statute of Limitations, has been extended without party consent by courts, at least temporarily. Knowing when a party’s ability to sue ends allows for proper planning, facilitates decision making, and promotes business prosperity because of the certainty and belief in our legal system.
States all over the country choose New York as their preferred state for choice of law provisions because of the quality of our court system and its decisions since we became a democracy. And one of those bedrocks that allows real estate to transfer with confidence is that only the Legislature, with Constitutional limitations, can amend a statute’s expiration of its time to sue.
The Court of Appeals has explained that Statutes of Limitation are “designed to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have failed, and witnesses have disappeared.” Blanco v. American Tel. & Tel. Co., 90 N.Y.2d 757, 773 (2000) quoting from Order of Railroad Telegraphers v. Railway Express Agency, 321 U.S.342, 348-349 (1944).
For practicing attorneys, recognizing when the statute of limitations for a particular matter is about to run is always of utmost importance because missing the applicable period will likely form an immutable barrier to the prosecution of a client’s action, and open the door to a claim for legal malpractice.
This article will examine the limited circumstances where a statute of limitations can be tolled and whether a court can provide attorneys with a life preserver by extending a statute of limitations.
Statutory Bar
CPLR § 201 states that “[a]n action, including one brought in the name or for the benefit of the State, must be commenced within the time specified in this article unless a different time is prescribed by law or a shorter time is prescribed by a written agreement.”
Importantly, § 201 goes on to provide that: “No court shall extend the time limited by law for the commencement of an action.” Id.
This is consistent with the long held belief of the Court of Appeals that “[a] Statute of Limitations is not open to discretionary change by the courts, no matter how compelling the circumstances…”. Arnold v. Mayal Realty Corp., 299 N.Y. 57, 60 (1947). See also Matter of Thorton v. NYC Housing Authority, 100 A.D.3d 556, 557 (1st Dept. 2012) (“[t]his Court cannot extend the statute of limitations.”); Roberts v. City University of New York, 41 A.D. 3d 825, 82. (2d Dept. 2007) (application to file a late claim in the Court of Claims denied because “[o]nce the applicable limitations period expired…the court was without authority either to entertain a subsequent motion to extend the time to file a late claim, or sua sponte, to grant such relief.”); Crum & Foster, Inc. Co. v. State of New York, 25 A.D. 3d 643 2d Dept. 2006) (reversing order of Court of Claims granting claimant leave to serve and file a properly verified claim as the statute of limitations had already run). The same holds true in criminal proceedings. See, People v Kellman, 156 Misc. 2d 179, 183 (Sup. Ct. Kings Cnty. 1992) (“ the court may not sua sponte, alter a statutory time period within which a defendant may invoke a right under the CPL.”
The Limited Exceptions
Notwithstanding this statutory bar, there are circumstances where a state court can sanction a tolling of the statute of limitations.
In State v. William, II, 224 A.D.3d 1356 (4th Dept. 2024), for example, the court found that an action was not time barred because Governor Cuomo had issued a series of executive orders in response to the COVID-19 pandemic, which had tolled “any specific time limit for the commencement… of any legal action…”
This comports with CPLR § 204(a), which provides that “[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.” See, e.g., Lubonty v. U.S. Bank National Assn., 34 N.Y. 3d 250, 258 (2019) (automatic bankruptcy stay pursuant to 11 U.S.C.A. §362 (a)(1) constitutes a statutory probation under CPLR 204(a) and reflects the “equitable principle that plaintiffs should not be penalized for failing to assert their rights when a court or statute prevents them from doing so.”); Wilson v. Motor Veh. Acc. Indem. Corp., 44 Misc 2d. 187 (Sup. Ct Bronx Cnty, 1964) (statute of limitations tolled because plaintiff was restrained from commencing action while court held in his abeyance motion for leave to sue); Vasquez v. Motor Vehicle Acc. Indemnification Corp., 272 A.D. 2d 275 (1st Dept. 2000) (because Insurance Law §5218 requires an order permitting MVAIC to be sued, the statute of limitations is tolled until the order granting leave is entered).
Furthermore, in Roldan v. Allstate Ins. Co., 149 A.D.2d 20, 32 (2d Dept. 1989), the Second Department found that the statute of limitations could be tolled where a cause of action had accrued but was “temporarily extinguished as a result of an erroneous court order, which was later reversed.” See also, Brown v. State, 250 A.D.2d 314, 319 (3d Dept. 1998) (holding that “the Statute of Limitations is tolled where the limitations would run against a person unable to bring an action based on a prior ruling.”) But this rule is fact dependent.
In Varo, Inc. v. Alvis PLC, 261 A.D.2d 262 (1st Dept. 1999), a case involving a claim for breach of contract, plaintiffs argued that an action brought by the government against the defendants under the Federal False Claims Act, which resulted in a qui tam proceeding requiring that the complaint to be under seal for a period of time, precluded them from bringing suit within the six-year statute of limitations period. Id. at 268. The court rejected plaintiffs’ contention, finding that nothing in the Federal False Claims Act prevented them from timely commencing the action. Id. at 268-69.
Of interesting note, the courts are clear that a limitations period is not tolled “while a petition for letters of administration is pending.” Xenias v. Mount Sinai Health System, Inc., 191 A.D. 3d 454, 455 (1st Dept. 2021); Singh v New York City Health & Hosp. Corp., 107 A.D. 780 (2d Dept. 2013).
Equitable Tolling: The Difference Between State and Federal Courts
Given the statutory bar of CPLR §201, and the limited exceptions which permit a tolling, the issue turns to whether a court can utilize the doctrine of “equitable tolling” to effectively extend the statute of limitations. The answer turns on the forum and the statutes involved.
Siegel, New York Practice §56 (6th Ed.) teaches that equitable tolling relates to federally created causes of action and has no precise state counterpart. The Court of Appeals for the Second Circuit has instructed that equitable tolling on the federal level “is only appropriate in rare and exceptional circumstances in which a party is prevented in some extraordinary way from exercising his rights.” Zerilli-Edelglass v. New York City Transit Authority, 333 F.3d 74, 80 (2d Cir. 2003) (citations and internal quotation marks omitted).
Illustratively, the doctrine is available where the plaintiff has actively pursued judicial remedies but filed a defective pleading during the specified time period or where a plaintiff’s medical condition or mental impairment prevented him/her from filing in a timely manner. Id. (citation and internal quotation marks omitted). However, “a want of diligence by a plaintiff’s attorney generally will not prompt a court to provide relief from a limitations period by way of an equitable toll.” Chapman v. ChoiceCare Long Island Term Disability Plan, 288 F. 3d 506, 512 (2d Cir. 2002).
Thus, federal courts “have typically extended equitable relief only sparingly.” O’Hara v. Bayliner, 89 N.Y.2d 636, 646 (1997) (quoting Irwin v. Dept. of Veterans Affairs, 498 U.S. 89, 96 (1990)) (internal quotation marks omitted) But no equitable toll is available at the state level.
“[E]quitable tolling does not apply to… state law claims, as the doctrine only tolls the statute of limitations with regard to federally created causes of action.” Von Hoffmann v. Prudential Ins. Co. of Am., 202 F. Supp. 2d 252, 264 (S.D.N.Y 2002).
The First Department is in accord. In Jang Ho Choi v. Beautri Realty Corp., 135 A.D.3d 451, 452 (1st Dept. 2016), plaintiff’s specific performance cause of action was found to be time-barred because the plaintiff did not commence his action within six years.
The court rejected the plaintiff’s contention that the statute was equitably tolled during the pendency of another case concerning a different party’s right to purchase the same property, as well as an action that the plaintiff had brought in South Korea.
The First Department stated in no uncertain terms that “the doctrine of equitable tolling is not available in state causes of action in New York.” Id. at 452. This follows prior First Department holdings in Ari v. Cohen, 107 A.D.3d 516, 517 (1st Dept. 2013), and Shared Communications Servs. of ESR, Inc. v. Goldman Sachs & Co., 38 A.D.3d 325 (1st Dept. 2007).
Interestingly, the Shared Communications court noted, in dicta, that a tolling might be possible under the theory of equitable estoppel.
Tolling by Equitable Estoppel
The Court of Appeals has instructed that the doctrine of equitable estoppel is “rooted in the principle that one may not take advantage of one’s own wrongdoing [and] operates to bar a party from asserting the Statute of Limitations when that party’s own wrongful concealment has engendered the delay in prosecution.” Matter of Steyer, 70 N.Y. 2d 990, 993 (1988). This principle is aptly demonstrated in Simcuski v. Saeli, 44 N.Y. 442 (1978)
In Simcuski, a doctor negligently injured a patient during surgery. Although the doctor knew that his negligence had caused potentially permanent injury, he falsely told her that her “pain and difficulties were transient and that they would disappear if she would continue a regimen of physiotherapy…” 44 N.Y. 2d at 447.
The patient relied upon the doctor’s assurances and did not discover the true extent of her injury until the Statute of Limitations had passed. Under these circumstances, the Court found that the plaintiff had justifiably relied on the doctor’s misrepresentations in not filing suit prior to the time she did and denied the doctor’s motion to dismiss plaintiff’s complaint. It wrote that, “a defendant may be estopped to plead the Statute of Limitations where plaintiff was induced, by fraud, misrepresentations, or deception to refrain from filing a timely action.” 44 N.Y. 2d at 448-449.
However, the court also provided the caveat that “[i]f the conduct relied on (fraud, misrepresentation, or other deception) has ceased to be operational within the otherwise applicable period of limitations (or perhaps within a reasonable time prior to the expiration of such period), many courts have denied application of the doctrine on the ground that the period during which the plaintiff was justifiably lulled into inactivity had expired prior to the statutory period, and that the plaintiff had thereafter had sufficient time to commence his action prior to the expiration of the period of limitations.” Id. at 449-450
Thus, it is the plaintiff’s burden “to establish that the action was brought within a reasonable time after the facts giving rise to the estoppel have ceased to be operational.” Id. at 450
Conclusion
The practitioner must be hyper-vigilant to make sure that a matter is brought within the statute of limitations as it is clear that unless there are extraordinary circumstances, the court will not and cannot throw you a lifeline.
Adam Leitman Bailey is the founding partner of Adam Leitman Bailey, P.C. Jeffrey Metz is the chief of the appellate group at the firm.
Read the full article on the New York Law Journal Here