By: Jeffrey M. Haber In Minihane v. Brown , 2026 N.Y. Slip Op. 01505 (2d Dept. Mar. 18, 2026), the Appellate Division, Second Department, addressed when the statute of limitations begins to run on a demand promissory note. The defendant borrowed $19,000 pursuant to a note that provided repayment was due only upon written demand, which could be made no earlier than January 1, 2015. Although the lender did not make a demand until September 2023, the borrower argued that the six‑year statute of limitations for breach of contract began running on the earliest permissible demand date, which had long since expired. The motion court rejected that argument, and the Second Department affirmed. The Court held that, under the plain terms of the note, repayment was conditioned on a demand, and the lender had no enforceable right to payment until such demand was made. Accordingly, the breach of contract cause of action accrued, and the statute of limitations began to run, only upon the actual demand for payment. Defendant borrowed $19,000 from his wife’s mother (plaintiff) on August 21, 2014, and executed a promissory note agreeing to pay back the money upon written request “no sooner than January 1, 20215” (“Promissory Note”). The Promissory Note did not include the payment of interest. On September 11, 2023, Plaintiff requested that the money be paid back. Defendant did not respond to plaintiff’s demand. On November 1, 2023, plaintiff filed a motion for summary judgment in lieu of complaint for repayment of the loan. On December 22, 2023, defendant opposed plaintiff’s motion and cross-moved, pursuant to CPLR 3211(a)(5), to dismiss the action in its entirety because the action was commenced after the expiration of the applicable statute of limitations. Defendant argued: (1) the face of the Promissory Note set January 1, 2015, as the date plaintiff could first demand payment; (2) as a demand note, the time to commence an action to enforce the Promissory Note began to run on January 1, 2015; (3) accounting for the “COVID toll,” resulting from the pandemic, [1] the six-year statute of limitations expired on August 17, 2021; and (4) plaintiff’s action was filed two years after the expiration of the statute of limitations. On March 4, 2024, the motion court granted plaintiff’s motion and denied defendant’s cross-motion. The motion court held that the statute of limitations began to run upon demand. The judgment was signed on March 14, 2024, and entered on March 26, 2024.  A party may move for judgment dismissing one or more causes of action asserted against it on the ground that the cause of action may not be maintained because of the applicable statute of limitations. [2]  “To dismiss a cause of action pursuant to CPLR 3211(a)(5) on the ground that it is barred by the Statute of Limitations, a defendant bears the initial burden of establishing prima facie that the time in which to sue has expired.” [3]  If a defendant satisfies its initial burden of establishing that the time in which to commence the action has expired, the burden then shifts to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or whether the plaintiff commenced the action before the expiration of the statute of limitations. [4]   A cause of action to recover on a promissory note has a six-year statute of limitations. [5]  “As a general principle, the statute of limitations begins to run when a cause of action accrues, that is, ‘when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court.’” [6]  Generally, “where ‘the claim is for payment of a sum of money allegedly owed pursuant to a contract, the cause of action accrues when the [party making the claim] possesses a legal right to demand payment.’” [7]  However, “‘when the right to final payment is subject to a condition, the obligation to pay arises and the cause of action accrues, only when the condition has been fulfilled.’” [8]  “A cause of action to recover on a note which is payable in full at one time accrues at the time it becomes due.” [9] The Second Department affirmed. The Court held that “under the specific terms of the promissory note at issue, repayment was not due until the plaintiff requested repayment, and the plaintiff was not entitled to obtain relief in court until she made such a request.” [10]  Thus, concluded the Court, “the statute of limitations did not begin to run until September 11, 2023, and this action was timely.” [11]   Takeaway A demand promissory note is a written agreement in which a borrower acknowledges a debt and promises to repay a specified sum of money, but only upon the lender’s affirmative demand for payment. Unlike a traditional promissory note that contains a fixed maturity date or a schedule of installment payments, a demand promissory note leaves the timing of repayment entirely within the lender’s control. The borrower’s obligation to pay does not arise automatically with the passage of time; rather, it is triggered only when the lender makes a clear demand, often in writing, in accordance with the terms of the note. Until that demand is made, the lender generally has no right to sue for nonpayment. This structure is commonly used in informal lending arrangements, such as loans between family members or closely held businesses, where flexibility is desired. From a legal standpoint, demand promissory notes carry important statute of limitations implications because, in many jurisdictions, such as New York, the limitations period begins to run only when a demand for payment is actually made. In Minihane , the Court rejected the defendant’s argument that the statute of limitations began to run on the earliest date the plaintiff could have demanded repayment under the Promissory Note. Instead, the Court focused on the plain language of the Promissory Note, which made repayment due only upon written request. Because no demand was made until September 11, 2023, the plaintiff had no enforceable right to payment, and therefore no accrued cause of action, before that date. As a result, the six‑year statute of limitations applicable to promissory notes did not begin to run until the demand was made, rendering the action timely. The decision also underscores the burden-shifting framework applicable to statute of limitations defenses under CPLR 3211(a)(5). While a defendant bears the initial burden of establishing that the time to sue has expired, that burden cannot be met where no earlier demand was made. In such circumstances, the defendant cannot rely on hypothetical or permissible demand dates to establish accrual. From a practical standpoint, Minihane  highlights the importance of the drafting and analysis of promissory notes. For lenders, demand notes can preserve enforceability for extended periods, as delay in making a demand postpones accrual of the claim. For borrowers, the absence of a demand may mean that a statute of limitations defense is unavailable, even many years after execution of the note. For litigators, Minihane  serves as a reminder that an accrual analysis must be grounded in the language of the contract at issue. ___________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions and not on matters handled by the firm. [1] The “COVID toll” refers to a series of executive orders issued by then‑Governor Andrew Cuomo in response to the COVID‑19 pandemic that temporarily stopped the running of statutes of limitations and other litigation deadlines statewide. This tolling was extended multiple times through successive executive orders and ultimately remained in effect from March 20, 2020 through November 3, 2020, a total of 228 days. New York courts have uniformly held that these orders created a toll, not a suspension. A toll stops the clock entirely, excluding the toll period from the statute of limitations calculation, rather than merely granting a grace period for claims that would have expired during the emergency. As a result, all civil causes of action governed by a limitation period, regardless of when they accrued, were extended by 228 days, unless the statute of limitations expired before March 20, 2020. [2] CPLR 3211(a)(5). [3] Savarese v. Shatz , 273 A.D.2d 219, 220 (2d Dept. 2000). [4] Elia v. Perla , 150 A.D.3d 962 (2d Dept. 2017). [5] See  CPLR 213(2);  Carpenito v. Linksman , 197 A.D.3d 553, 554 (2d Dept. 2021). [6] Hahn Automotive Warehouse, Inc. v. American Zurich Ins. Co. , 18 N.Y.3d 765, 770 (2012) (citation omitted), quoting  Aetna Life & Cas. Co. v. Nelson , 67 N.Y.2d 169, 175 (1986). [7] Id. , quoting  Minskoff Grant Realty & Mgt. Corp. v. 211 Mgr. Corp. , 71 A.D.3d 843, 845 (2d Dept. 2010). It should be noted that under General Obligations Law § 17-101, a party can revive a claim for non-payment notwithstanding the statute of limitations. Under this section, “[a]n acknowledgment or promise contained in a writing signed by the party to be charged thereby is the only competent evidence of a new or continuing contract whereby to take an action out of the operation of the provisions of limitations of time for commencing actions under the civil practice law and rules other than an action for the recovery of real property. This section does not alter the effect of a payment of principal or interest.” A “writing, in order to constitute an acknowledgment, must recognize [the] existing debt and must contain nothing inconsistent with an intention on the part of the debtor to pay it.” Lew Morris Demolition Co. v. Board of Educ. of City of N.Y. , 40 N.Y.2d 516, 521 (1976);  see also Pugni v. Giannini , 163 A.D.3d 1018, 1019-1020 (2d Dept. 2018).  [8] Id. , quoting  John J. Kassner & Co. v. City of New York , 46 N.Y.2d 544, 550 (1979). [9] Morrison v. Zaglool , 88 A.D.3d 856, 858 (2d Dept. 2011). “However, with respect to a note payable in installments, … , there are separate causes of action for each installment accrued, and the statute of limitations begins to run on the date each installment becomes due and is defaulted upon, unless the debt is accelerated.” Sce v. Ach , 56 AD3d 457, 458 (2d Dept. 2008) (citations omitted). [10] Slip Op. at *1. [11] Id. , citing Hahn Automotive , 18 N.Y.3d at 770-772; Morrison , 88 A.D.3d at 858.

By Jonathan H. Freiberger On March 17, 2026, the Appellate Division, First Department, decided HSBC  Bank USA, N.A. v. Nicholas , a mortgage foreclosure action that addresses many of the issues raised in our prior BLOG articles. HSBC  involves the Foreclosure Abuse Prevention Act  (“FAPA”), and the statute of limitations in foreclosure actions. By way of brief background, FAPA went into effect in December of 2022, and “represents the Legislature’s response to litigation strategies and certain legal principles that distorted the operation of the statute of limitations in foreclosure actions.” Genovese v. Nationstar Mortgage LLC , 223 A.D.3d 37, 41 (1 st  Dep’t 2023) (citation omitted). Thus, inter alia , FAPA’s provisions were designed to prevent lenders from circumventing statute of limitations problems in residential mortgage foreclosure actions by the simple expedient of accelerating and deaccelerating loans to restart the running of statutes of limitations. FAPA applies retroactively. See, e.g ., Van Dyke v. U.S. Bank, N.A . , 2025 WL 3272341 (Court of Appeals 2025). Further, a mortgage foreclosure action is governed by a six-year statute of limitations. CPLR 213(4) ; see also  Anglestone Real Estate Venture Partners Corp. v. Bank of New York Melon , 221 A.D.3d 943, 946 (2nd Dep’t 2023). When mortgage payments are payable in installments, the six-year period runs from each missed payment, but, upon acceleration, the statute of limitations begins to run anew on the entire accelerated debt. Anglestone, 221 A.D.3d at 946; see also Mills v. Deutsche Bank Nat. Trust , 235 A.D.3d 740 (2nd Dep’t 2025). Acceleration can be accomplished by making a demand for payment of the full amount due under the subject loan due to a default or by the commencement of a foreclosure action in which the lender demands payment of all sums due under the mortgage. Caprotti v. Deutsche Bank National Trust Co. , 220 A.D.3d 1126, 1127 (3rd Dep’t 2023); GMAT Legal Title Trust 2014-1 v. Kator , 213 A.D.3d 915, 916 (2nd Dep’t 2023). HSBC BANK HSBC commenced a mortgage foreclosure action in 2008, which accelerated the loan (the “First Foreclosure Action”). The First Foreclosure Action was discontinued, without prejudice, pursuant to a stipulation by which the parties agreed that any claims one party had against the other would be tolled until June 1, 2013 (the “Stipulation”). A subsequent foreclosure action was commenced in 2018 (the “Second Foreclosure Action”). In response to HSBC’s motion for summary judgment in the Second Foreclosure Action, the borrower cross-moved to dismiss arguing that the Second Foreclosure Action was time-barred under FAPA. The motion court denied HSBC’s motion and granted the borrower’s cross-motion. The motion court found that FAPA was applicable and the voluntary discontinuance did not deaccelerate the loan and reset the applicable limitations period. For technical reasons beyond the scope of this article, the motion court also found the Stipulation was invalid and did not toll the statute of limitation. HSBC appealed. The First Department reversed; holding that Stipulation tolled the statute of limitations, notwithstanding FAPA. The Court reiterated that FAPA’s application was retroactive. Nonetheless, the Court found that the Stipulation was compliant with, and enforceable under, CPLR 2104  and operated to toll the applicable limitations period. The Court also found that the Stipulation, which was signed by counsel, did not have to be signed by the parties themselves pursuant to GOL § 17-105(1)  because “GOL § 17-105(5)(b) provides that ‘[t]his section does not change the requirements or the effect with respect to the accrual of a cause of action, nor the time limited for commencement of an action based upon . . . a stipulation made in an action or proceeding.’” Therefore, the Stipulation did not have to comply with GOL § 17-105(1). The Court also found that CPLR 3217 , which was also amended by FAPA, did not impact its decision. In so doing, the Court stated: CPLR 3217, also amended by FAPA, now provides, in relevant part, that “the voluntary discontinuance” of a mortgage foreclosure action “on . . . stipulation . . . shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action . . . unless expressly prescribed by statute” (CPLR 3217[e]). However, the Senate Sponsor’s Memorandum in Support clarifies that FAPA does not prevent parties from agreeing to extend the limitations period for a foreclosure action; rather, it identifies General Obligations Law § 17-105 as “the exclusive means” to do so (see Senate Sponsor’s Mem in Support of 2022 NY Senate Bill S5473D). The Sponsor’s Memo repeatedly warned of lenders’ “unilateral” acts, including lenders’ “unilateral ability to toll or extend the time prescribed by law to commence an action”; their ability to “unilaterally manipulate” the limitation period; and their ability to effect a “unilateral ‘de-acceleration’” (id.). And it explained that a “bare stipulation of discontinuance or a lender’s unilateral decision to revoke its demand for full payment is not a method prescribed by the Legislature for waiving, extending, or modifying the statute of limitations” (id.). This language suggests that the Legislature did not intend to abrogate the ability of parties to extend the statute of limitations by explicit agreement, even if the stipulation also voluntarily discontinued the action. After reiterating why FAPA does not violate a lender’s substantive and procedural due process rights and that the retroactive application of FAPA does not constitute a regulatory taking, the Court held that: Simply put, despite FAPA’s retroactive application, the parties’ 2011 stipulation in which they expressly agreed to toll the limitations period to June 1, 2013 effectively tolled the limitations period to that date. Plaintiff’s commencement of this action on February 16, 2018, less than six years later, was thus timely.  Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

. By Jonathan H. Freiberger Last Week in our BLOG article: “ Just When You Thought It Could Not Get More Unanimous, The Court of Appeals Determines that FAPA’s Retroactive Application Does Not Violate the Due Process or Contract Clauses of the United States Constitution or the Right to Substantive and Procedural Due Process Under the New York Constitution – Part 1 ,” we discussed FAPA and the New York Court of Appeals’ decision in Van Dyke v. U.S. Bank, N. A. , in which the Court determined that retroactive application of FAPA passes constitutional muster under the Constitution of the United States. We also promised a sequel – and here it is. Today we will discuss Van Dyke’s  sister case, Article 13 LLC v. Ponce De Leon Fed. Bank . ARTICLE 13 LLC Certified Questions Article 13 LLC  arrived at the door of the New York Court of Appeals from the United States Court of Appeals for the Second Circuit ( Art. 13 LLC v. Ponce De Leon Fed. Bank,  132 F.4th 586, 594 (2d Cir.2025 ) ) on the following two certified question: “1. Whether, or to what extent does, Section 7 of the Foreclosure Abuse Prevention Act, codified at N.Y. C.P.L.R. § 213(4)(b) , apply to foreclosure actions commenced before the statute's enactment.” “2. Whether FAPA's retroactive application violates the right to substantive and procedural due process under the New York Constitution, N.Y. Const., art. I, § 6 . ” (Hyperlink added.) Underlying Facts Borrower purchased a property in Brooklyn, New York, that was subject to a first mortgage. At or around the time of the purchase, borrower borrowed additional funds and delivered a second mortgage to the lender. The first and second mortgages were consolidated into a single consolidated mortgage on the property (the “Senior Mortgage”). The same day that the consolidated loan transaction occurred, the borrower borrowed additional funds from the consolidated loan lender, who took a second mortgage on the property (the “Junior Mortgage”). Thereafter, the Senior Mortgage was sold. Central Mortgage Company (“CMC”) was the servicer until July of 2008. In 2007, the borrower defaulted on the consolidated loan and, later that year, CMC commenced a foreclosure action (the “First Foreclosure Action”) in its own name against the borrower, in which it identified itself as the holder of the consolidated loan. Ten years later, in 2017, CMC’s motion to discontinue the First Foreclosure Action was granted.  In 2020, Article 13 LLC acquired the Junior Mortgage and brought a quiet title action pursuant to RPAPL 1501(4) in the United States District Court for the Eastern District of New York in which it sought to cancel and discharge the Senior Mortgage as time barred. Both parties moved for summary judgment. The lender, among other things, argued that CMC’s acceleration of the Senior Mortgage was invalid. Both motions were denied by the district court, which held, in part, that: there was a disputed issue of material fact regarding whether CMC had standing to bring the [First] Foreclosure Action as a "holder" of the Consolidated Note. Article 13 LLC v. Ponce de Leon Fed. Bank , No. 20-CV-3553 (HG), 2022 WL 17977493, at 7, 9 (E.D.N.Y. Dec. 28, 2022). That genuine dispute related to material facts because, if CMC lacked standing, the [First] Foreclosure Action was invalid to accelerate the debt, and the statute of limitations on the Senior Mortgage did not begin to run with CMC's initiation of the Foreclosure Action. (Hyperlink added.) FAPA was enacted two days after the district court’s decision. Section 7 of FAPA, which is codified at CPLR 231(4)(b), provides: In any action seeking cancellation and discharge of record of an instrument described under subdivision four of section fifteen hundred one of the real property actions and proceedings law, a defendant shall be estopped from asserting that the period allowed by the applicable statute of limitation for the commencement of an action upon the instrument has not expired because the instrument was not validly accelerated prior to, or by way of commencement of a prior action, unless the prior action was dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated. Section 10 of FAPA provides that the law "shall apply to all actions commenced on [a mortgage] in which a final judgment of foreclosure and sale has not been enforced.” After FAPA’s enactment, Article 13 LLC moved for reconsideration “arguing that FAPA was an intervening change in controlling law” and, therefore, Section 7 of FAPA applied and operated to estop the lender from challenging the validity of CMC’s acceleration. The district court agreed and held that FAPA’s retroactive application “estopped [the Senior Mortgage Lender] from bringing a defense against the quiet title action based on the invalidity of a prior acceleration of the mortgage debt.” Accordingly, summary judgment was granted to Article 13 LLC.  The Senior Mortgage lender appealed to the Second Circuit. The Second Circuit articulated the issues related to New York law raised by the Senior Mortgage lender as “(1) whether FAPA applies retroactively as a matter of statutory construction, and (2) whether its retroactive application would violate substantive and procedural due process rights guaranteed by the N.Y. Constitution. After reviewing the issues, the Second Circuit certified the referenced questions to the Court of Appeals. Legal Analysis The Court of Appeals’ analysis tracks that which was discussed in last week’s BLOG. Retroactivity The Court of Appeals found that the “plain language” of FAPA Sections 7 and 10 supports retroactivity. Accordingly, it framed the “real issue” as being one of timing: “ how does FAPA apply to pending or future foreclosure actions when a previous foreclosure action was dismissed for some reason other than ‘an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated?’” Although legislation is presumed to apply prospectively, retroactive application, according to the Court of Appeals , is appropriate where “(1) the legislature has made a specific pronouncement with respect to retroactive effect or conveyed a sense of urgency, (2) the statute was designed to rewrite an unintended judicial interpretation and (3) the statute reaffirms a legislative judgment about what the law in question should be.” (Citation and internal quotation marks omitted). Simply stated, the Court of Appeals found all three factors applicable and, therefore: even if a prior foreclosure action was commenced by another party not in possession of the underlying note, and that action was discontinued without an express determination by the court that the instrument was not validly accelerated, the six-year statute of limitations accrued on the date that action was commenced and continued to run from that date, tollable only as provided for under FAPA. Violation of New York State Constitution Substantive Due Process Having found retroactivity appropriate “in some circumstances,” the Court of Appeals moved on to the question of whether the retroactive application of FAPA violates both procedural and substantive due process rights afforded by the New York State Constitution. The Court of Appeals found that it did not. Substantive due process is implicated when vested rights are “taken away or impaired.” (Citation omitted.) The Court of Appeals’ discussion focused on the lender’s lack of diligence being the true issue and, when observed in that light, “FAPA Section 7 does not deprive the noteholder of the ability to protect its property interest.” The Court of Appeals also noted that even if a protectable interest was impaired by FAPA, “the legislature may impair legally cognizable interests without running afoul of substantive due process” if “a rational legislative purpose” exists. (Citations and internal quotation marks omitted.) Based on prior abuses of borrowers by financial institutions, the Court of Appeals found that the FAPA legislation was rationally based. Procedural Due Process The Court of Appeals a lso found that the lender’s procedural due process rights were not impacted. The lender argued that “that because FAPA Section 7 modified the event that triggers the limitations period, our Court must therefore provide a reasonable time in which to file foreclosure actions that would be timely but for FAPA's application.” (Citation, internal quotation marks and brackets omitted.) The Court of Appeals rejected the lender’s argument finding that “FAPA did not alter the six-year statute of limitations whatsoever; the successive holders of the note and mortgage have had the full six-year limitations period in which to discontinue an improperly commenced foreclosure action and commence a new one lacking the prior infirmity.” Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jonathan H. Freiberger As readers of this BLOG know, we frequently write about issues relating to mortgage foreclosure. [1]  We have also written numerous articles relating to the recently enacted FAPA . See, e.g.,  [ here ], [ here ], [ here ], [ here ] and [ here ]. Today’s BLOG article relates to Wilmington Trust, N.A. v. Farkas , and Bayview Loan Servicing, LLC v. Dalal , cases decided by the Appellate Division, First Department, on November 21, 2024, and November 19, 2024, respectively. [2] FARKAS The lender in Farkas  commenced a foreclosure action in 2008 in which, by the complaint, it elected to accelerate the loan. [3]  The 2008 action was voluntarily dismissed in 2013. A new action was commenced to foreclose the same mortgage in 2022. The Court found that the voluntary discontinuance of the 2008 action did not operate to deaccelerate the loan because FAPA “provides that the voluntary discontinuance of such an action “shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action.” The Court also found that a 2014 “de-acceleration letter” did not operate to de-accelerate the loan because of FAPA’s addition of CPLR 203(h) , prevents a party from “unilaterally” resetting the statute of limitations. [4] The Court also found that the lender’s argument that FAPA should not be applied retroactively, is contrary to its decision in Genovese  and the Third Department’s recent decision in U.S. Bank N.A. v Lynch  (a case this BLOG addressed [ here ]). According to the plain language of FAPA, it “applies to pending suits ‘in which a final judgment of foreclosure and sale has not been enforced’” and was enacted, inter alia , to curtail ability of lenders “to manipulate the limitations period [which practice] was ‘to the clear detriment of New York homeowners,’ and [because] ‘[n]o other civil plaintiff in this state is extended such unilateral and unfettered powers’ to restart the limitation period.” ( Quoting  the Senate Mem in Support of 2022 NY Senate Bill S5473D.) Accordingly: retroactive application of FAPA is supported by a legitimate legislative purpose furthered by rational means. These facts, together with the Legislature’s statement that FAPA was remedial and meant to clarify existing law, warrant FAPA’s application to pending actions. [Citation and internal quotation marks omitted.] Similarly, the Court also found that retroactive application of FAPA is consistent with due process as the legislation was “remedial” in nature and furthered a “rational legislative purpose” that “allow FAPA to “meet the test of due process.” (Citation and internal quotation marks omitted.) The Court also rejected the lender’s separation of powers argument and its argument that FAPA’s application “would violate the Contracts Clause of the Federal Constitution.” DALAL [5] In 2009, the lender commenced an action to foreclose a mortgage and, in the complaint, elected to accelerate the loan balance. In 2014, the lender sent the borrower a “de-acceleration” letter. In 2015, the motion court granted the lender’s motion to discontinue the 2009 action. A new action to foreclose the same mortgage was commenced in 2016. The motion court denied the borrower’s motion for summary judgment dismissing the complaint on statute of limitations grounds because the “de-acceleration” letter raised factual questions as to whether the loan was de-accelerated. The borrower renewed its motion for summary judgment after the passage of FAPA arguing that the new CPLR 203(h) warranted the granting of the motion. The Court agreed and, in so doing, rejected the lender’s argument that CPLR 203(h) does not apply retroactively and that, even if it does, the statute violates due process, the contract clause of the New York and United States Constitutions, and the United States Constitution’s Takings Clause.”. For reasons like those stated in Farkas , Genovese  and Lynch , the Court held that FAPA was to be applied retroactively. The Court held that CPLR 203(h) did not violate due process due to its remedial nature in curtailing “abusive and unlawful litigation tactics” of lenders. (Citation and internal quotation marks omitted.) Thus, retroactive application of CPLR 203(h) serves a legitimate legislative purpose furthered by rational means.” (Citation and internal quotation marks omitted.) As to the lender’s “contract rights” arguments, the Court stated: In addition, although plaintiff asserts that it has a contractual or property right to de-accelerate a loan, plaintiff has not identified a contract provision giving it this right. Accordingly, retroactive application of CPLR 203(h) does not significantly affect contractual or property rights so as to raise heightened concerns. Plaintiff also points to no contract provision in its loan documents that CPLR 203(h) purportedly impairs such that the statute violates the contracts clauses of the New York and United States Constitutions. [Citation and internal quotation marks omitted.] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1]  Eds. Note: this BLOG has written numerous articles addressing all aspects of residential mortgage foreclosure. To find BLOG articles related to mortgage foreclosure, visit the “ Blog ” tile on our website  and enter “foreclosure” (or any related topic of interest) in the “search” box. [2]  Eds. Note: On December 19, 2023, the Appellate Division, First Department, in Genovese v. Nationstar Mortgage LLC , 223 A.D.3d 37 (2023), held that FAPA is to be applied retroactively. However, the First Department could not consider the lender’s “constitutional challenges to the retroactive application of FAPA under the Contract and Due Process Clauses of the Federal Constitution because defendant did not notify the Attorney General of those challenges ( see  CPLR 1012 [b]).” Genovese , 223 A.D.3d at 45. This Blog wrote about Genovese [ here ]. [3]  Eds. Note: this BLOG has written numerous articles addressing all aspects of loan acceleration. To find BLOG articles related to loan acceleration, visit the “ Blog ” tile on our website  and enter “accelerate” (or any related topic of interest) in the “search” box. [4]  Even without FAPA, the Court indicated that the 2022 action would have been time barred because the purported de-acceleration occurred after the statute of limitations expired and, accordingly, such “expiration would have foreclosed plaintiff from revoking acceleration of the loan.” ( Citing   Fed. Nat. Mort. Ass’n v. Rosenberg , 180 A.D.3d 401, 402 (1 st  Dep’t 2020).) [5]  The facts of Dalal  as recited herein are simplified for editorial purposes.

By Jonathan H. Freiberger This BLOG has written numerous times on issues related to statutes of limitation in mortgage foreclosure actions.  See, e.g.,  [ here ], [ here ], [ here ], [ here ], [ here ], [ here ], [ here ], [ here ] and [ here ].   As previously described in this BLOG an action to foreclose a mortgage is governed by a six-year statute of limitations.  CPLR 213(4) .  See also   Fed. Nat. Mort. Assoc. v. Schmitt , 172 A.D.3d 1324, 1325 (2 nd  Dep’t 2019).  When a mortgage is payable in installments, “separate causes of action accrue for each installment that is not paid and the statute of limitations begins to run on the date each installment becomes due.”  HSBC Bank USA, N.A. v. Gold , 171 A.D.3d 1029, 1030 (2 nd Dep’t 2019).  Most mortgages, however, provide that a mortgagee may accelerate the entire debt in the event of, inter alia , a payment or other default by a mortgagor. Thus, “the terms of the mortgage may contain an acceleration clause that gives the lender the option to demand due the entire balance of principal and interest upon the occurrence of certain events delineated in the mortgage.”  Bank of New York Mellon v. Dieudonne , 171 A.D.3d 34, 37 (2 nd  Dep’t 2019) (citations and internal quotation marks omitted).  Once the mortgagee’s election to accelerate is properly made, “the borrower’s right and obligation to make monthly installments ceased and all sums became immediately due and payable.”  The statute of limitations begins to run anew on the entire debt upon acceleration.  Gold , 171 A.D.3d at 1030 (citations omitted). A defendant moving to dismiss a complaint pursuant to CPLR 3211(a)(5) on statute of limitations grounds has the burden of establishing “prima facie, that the time in which to commence the action has expired.”  Wells Fargo Bank, N.A. v. Islam , 193 A.D.3d 1016, 1017 (2 nd  Dep’t 2021) (citations and internal quotation marks omitted).  If the defendant satisfies the burden “the burden shifts to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or otherwise inapplicable, or whether the plaintiff actually commenced the action within the applicable limitations period.”  Id.  at 2017 – 18 (citations and internal quotation marks omitted). The Foreclosure Abuse Prevention Act  (“FAPA”), which went into effect on December 30, 2022, was enacted to, inter alia ,  curtail certain practices of lenders designed to avoid statute of limitations issues by accelerating and deaccelerating loans to start the running of statutes of limitations anew.  [Eds. Note: This BLOG addressed FAPA [ here ] and [ here ].]  Indeed, FAPA amended CPLR 3217  to include a new subdivision (e) [1] , which provides: In any action on an instrument described under subdivision four of section two hundred thirteen of this chapter, the voluntary discontinuance of such action, whether on motion, order, stipulation or by notice, shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute.   It is CPLR 3217(e) that was at issue in HSBC Bank USA, N.A. v. Corrales , decided by the Appellate Division, Second Department, on February 21, 2024.  The borrower in Corrales  delivered a mortgage on real property to secure a $600,000.00 loan.  In 2009, the lender commenced an action to foreclose the loan, which action was voluntarily discontinued in 2014.  The lender commenced a new action in 2016.  The borrower moved to dismiss the new action, as time-barred, pursuant to CPLR 3211 (a)(5).  The lender cross-moved for summary judgment.  The borrower appealed from the motion court’s denial of the borrower’s motion and the granting of the lender’s cross-motion. The Second Department reversed, granted the borrower’s motion and dismissed the complaint as time-barred.  The Court found that the borrower “demonstrated that the six-year statute of limitations began to run on the entire debt in May 2009, when the [first foreclosure] action was commenced and the [lender] elected to call due the entire amount secured by the mortgage [and she also] demonstrated that the instant action was commenced in April 2016, more than six years later.”  (Citations omitted.)  Finally, evidence that the prior foreclosure action was voluntarily discontinued in 2014 was also submitted. In response, the lender, relying on Freedom Mortgage Corp. v. Engel , 37 N.Y.3d 1 (2021), [2] argued that the voluntary discontinuance of the prior action deaccelerated the loan and, accordingly, the new action was timely.  Relying on FAPA, which added CPLR 3217(e), the Court rejected the lender’s argument.  Thus, the Court held that “the voluntary discontinuance of the 2009 action did not in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim.”  (Citations and internal quotation marks omitted.) The Court also rejected another argument made by the lender regarding deacceleration, and stated: Moreover, any claim by the [lender] that by mailing certain mortgage statements to the [borrower] subsequent to the discontinuance of the [prior] action, the mortgage debt was de-accelerated, is without merit. Pursuant to CPLR 203 (h), part of the recently enacted Foreclosure Abuse Prevention Act, "[o]nce a cause of action upon an instrument described in [ CPLR 213 (4)] has accrued, no party may, in form or effect, unilaterally waive, postpone, cancel, toll, revive, or reset the accrual thereof, or otherwise purport to effect a unilateral extension of the limitations period prescribed by law to commence an action and to interpose the claim, unless expressly prescribed by statute."  (Hyperlinks added.)   Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] [Eds. Note: This BLOG addressed other aspects of CPLR 3217 [ here ], [ here ] and [ here ].] [2] [Eds. Note: this BLOG discussed Engel  [ here ], [ here ], and [ here ].]  It should be noted that Engel  was “legislatively overruled” by certain provisions of FAPA.   Bank of America v. Kessler , 39 N.Y.3d 317, n. 3 (2023).

By: Jonathan H. Freiberger Today’s article revisits statute of limitations issues and FAPA [1] in residential mortgage foreclosure actions [2] . Briefly stated, a mortgage foreclosure action is governed by a six-year statute of limitations. CPLR 213(4) ; see also Anglestone Real Estate Venture Partners Corp. v. Bank of New York Melon , 221 A.D.3d 943, 946 (2 nd  Dep’t 2023). When mortgage payments are payable in installments, the six-year period runs from each missed payment, but, upon acceleration, the statute of limitations begins to run anew on the entire accelerated debt. Anglestone , 221 A.D.3d at 946; see also Mills v. Deutsche Bank Nat. Trust , 235 A.D.3d 740 (2 nd  Dep’t 2025). Acceleration can be accomplished by making a demand for payment of the full amount due under the subject loan due to a default or by the commencement of a foreclosure action in which the lender demands payment of all sums due under the mortgage. Caprotti v. Deutsche Bank National Trust Co. , 220 A.D.3d 1126, 1127 (2 nd Dep’t 2023); GMAT Legal Title Trust 2014-1 v. Kator , 213 A.D.3d 915, 916 (2 nd  Dep’t 2023). The Foreclosure Abuse Prevention Act (“FAPA”), “represents the Legislature’s response to litigation strategies and certain legal principles that distorted the operation of the statute of limitations in foreclosure actions.” Genovese v. Nationstar Mortgage LLC , 223 A.D.3d 37, 41 (1 st  Dep’t 2023) (citation omitted). [3] Among other statutory provisions, FAPA created CPLR 213(4)(a), which provides that “[i]n any action on an instrument described under this subdivision, if the statute of limitations is raised as a defense, and if that defense is based on a claim that the instrument at issue was accelerated prior to, or by way of commencement of a prior action, a plaintiff shall be estopped from asserting that the instrument was not validly accelerated, unless the prior action was dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated.” See also Kator , 213 A.D.3d at 916-17. Today’s BLOG relates to Deutsche Bank National Trust Co. v. DiGiorgio , a case decided by the Appellate Division, Second Department, on April 16, 2025. The lender in DiGiorgio , at this time One West, commenced an action in 2009 to foreclose a mortgage (the “First Action”). The First Action was voluntarily discontinued in 2016 by court order. In 2018, a new action was commenced by the lender, this time plaintiff, Deutsche Bank, to foreclose the same mortgage and in which the lender claimed new defaults (the “Present Action”). The lender moved for summary judgment and the borrower cross-moved for summary judgment dismissing the complaint on statute of limitations grounds. The lender appeals from the denial of the lender’s motion and the granting of the borrower’s motion. After discussing the law on statutes of limitation in foreclosure actions, the Court determined that the lender’s claims were time barred because the borrower demonstrated that the “six-year statute of limitations began to run in October 2009 when [the lender] commenced the [First Action] and elected in the complaint to call due the entire amount secured by the mortgage” (citation omitted) and that the Present Action was commenced more than six years after the First Action. Relying on CPLR 213(4)(a) and Kator , supra , the Court rejected the lender’s argument that the loan was not accelerated because One West lacked standing to commence the First Action. The Court found that the lender was estopped from making its argument that there was no prior acceleration because the First Action “was not dismissed based upon an expressed judicial determination that the instrument was not validly accelerated”. The Court also rejected the lender’s argument that One West’s voluntary discontinuance of the First Action “served to revoke the acceleration and reset the statute of limitations.” The Court noted that “FAPA amended CPLR 3217 , governing the voluntary discontinuance of an action, by adding a new paragraph (e), which provides that 'in any action on an instrument described under [CPLR 213(4)], the voluntary discontinuance of such action, whether on motion, order, stipulation or by notice, shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute.’” (Citation, internal quotation marks and brackets omitted, hyperlink added.) The Court further noted that “even prior to the enactment of FAPA, the discontinuance of the 2009 action would not have been effective to reset the statute of limitations because the discontinuance did not occur during the six-year limitations period.” (Citation omitted.) [4] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This BLOG has written numerous of articles addressing FAPA and statutes of limitation in residential mortgage foreclosure actions. To find such articles, please see the BLOG  tile on our website  and type “statute of limitations mortgage foreclosure”, “FAPA” or any other issue related to mortgage foreclosure into the “search” box. For a concise explanation of the inter relationship between the statute of limitations, acceleration and the Foreclosure Abuse Prevention Act (“FAPA”) see, e.g., [ here ]. [2] This BLOG has written dozens of articles addressing all aspects of residential mortgage foreclosure. To find such articles, please see the BLOG  tile on our website  and search for any foreclosure, or other commercial litigation, issue that may be of interest you. [3] This Blog wrote about Genovese  [ here ]. [4] The Court also rejected the lender’s challenge to the constitutionality of the retroactive application of FAPA. This BLOG addressed the retroactive application of FAPA on numerous occasions. See, e.g., [ here ], [ here ] and [ here ].

By: Jonathan H. Freiberger Seasoned attorneys will get the reference in the title of this article to one of Maxwell Smart’s catch phrases from “Get Smart”, but most of the younger folks might not. [1]  In any event, the phrase seems prescient in light of a nuanced FAPA related change to CPLR 205 . As stated in prior BLOG articles, when a applicable statute of limitations expires during the pendency of an action, under certain circumstances, CPLR 205(a) permits the plaintiff to commence a new action if the original action is dismissed but was timely commenced. [2] CPLR 205(a) provides: If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff … may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action and that service upon defendant is effected within such six-month period. Where a dismissal is one for neglect to prosecute the action made pursuant to rule thirty-two hundred sixteen of this chapter or otherwise, the judge shall set forth on the record the specific conduct constituting the neglect, which conduct shall demonstrate a general pattern of delay in proceeding with the litigation. [Emphasis added.] At the end of 2022, the Foreclosure Abuse Prevention Act (“FAPA”) went into effect. [3] FAPA amends certain provisions of the CPLR and other statutes to the extent they relate to, inter alia , residential mortgage foreclosure actions. [4] Among other things, FAPA’s provisions were designed to prevent lenders from circumventing statute of limitations problems in residential mortgage foreclosure actions by the simple expedient of accelerating and deaccelerating loans to restart the running of statutes of limitations. As part of FAPA, the Legislature enacted CPLR 205-A , [5] which addresses issues similar to those in CPLR 205(a), but specifically in the context of certain residential mortgage foreclosure actions. CPLR 205-A provides: If an action upon an instrument described under subdivision four of section two hundred thirteen of this article is timely commenced and is terminated in any manner other than a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for any form of neglect, including, but not limited to those specified in subdivision three of section thirty-one hundred twenty-six, section thirty-two hundred fifteen, rule thirty-two hundred sixteen and rule thirty-four hundred four of this chapter, for violation of any court rules or individual part rules, for failure to comply with any court scheduling orders, or by default due to nonappearance for conference or at a calendar call, or by failure to timely submit any order or judgment, or upon a final judgment upon the merits, the original plaintiff … may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months following the termination, provided that the new action would have been timely commenced within the applicable limitations period prescribed by law at the time of the commencement of the prior action and that service upon the original defendant is completed within such six-month period. For purposes of this subdivision: 1. a successor in interest or an assignee of the original plaintiff shall not be permitted to commence the new action, unless pleading and proving that such assignee is acting on behalf of the original plaintiff; and 2. in no event shall the original plaintiff receive more than one six-month extension. [Emphasis supplied.] One subtle difference between CPLR 205(a) and 205-A (as indicated in the italicized language) is that CPLR 205-A requires service of process to be completed  before a plaintiff receives the benefits of the statute. This issue was decisive in Deutsche Bank Nat. Trust Co. v. Zak , decided by the Appellate Division, Second Department, on February 19, 2025. The lender in Zak  commenced a mortgage foreclosure action on September 25, 2009. A second action was commenced on August 19, 2015, to foreclose the same mortgage. In 2017, the 2009 action was dismissed pursuant to CPLR 3216  for failure to prosecute. On July 17, 2018, the motion court granted the borrowers’ cross-motion to dismiss the complaint in the 2015 action due to the lender’s failure to comply with RPAPL 1304. [6] A new foreclosure action was commenced by the lender on December 14, 2018. Borrower 1 was served personally ( CPLR 308(1) ) on December 28, 2018. Borrower 2 was served on January 7, 2019, by delivering the summons and complaint to someone of suitable age and discretion ( CPLR 308(2) ) and the related affidavit of service was filed on January 9, 2019. Pursuant to CPLR 308(2), service was completed on January 19, 2018, ten days after the filing of the affidavit of service related to borrower 2. In their answer to the 2018 action, the borrowers asserted a counterclaim to discharge the mortgage of record pursuant to RPAPL 1501(4) . [7] The lender moved to dismiss the counterclaim and the borrowers cross-moved for summary judgment on the counterclaim and on statute of limitations grounds. Not persuaded by the lender’s argument that the 2018 action was timely commenced pursuant to CPLR 205(a), the motion court denied the lender’s motion and granted the borrowers’ cross-motion. The lender appealed. The Court modified the motion court’s order and determined that the 2018 action was timely commenced as to borrower 1, but not borrower 2. After explaining the differences between CPLR 205(a) and 205-A, the Court reiterated that a crucial distinction between the two provisions is that with respect to CPLR 205-A, service of process must be completed  within the relevant six-month period. As to the relevant time periods, the Court explained that “the mortgage debt was first accelerated, and the statute of limitations began to run, when the [lender] commenced the [2009] action on September 25, 2009. Thus, the statute of limitations expired six years later on September 25, 2015. The [2015] action was timely commenced on August 19, 2015, and the instant action was commenced on December 14, 2018, more than three years after the statute of limitations expired.” (Citation omitted.) [8] The Court explained why the lender could proceed against borrower 1, but with respect to borrower 2, the lender “missed it by that much”: Under the standard set forth in either CPLR 205(a) or CPLR 205-a, the action was timely insofar as asserted against [borrower 1]. Initially, contrary to the Supreme Court's determination, a dismissal for failure to comply with RPAPL 1304 did not constitute a dismissal on the merits for the purposes of CPLR 205(a) and 205-a because the dismissal of a complaint for the failure to satisfy a condition precedent to suit is not a 'final judgment upon the merits' for the purposes of CPLR 205(a). Under CPLR 205(a) or 205-a, the six-month period to recommence the action ran from the date of entry of the order dismissing the [2015] action, which was July 17, 2018. [Borrower 1] was served personally on December 28, 2018, and service was effected and completed on that day pursuant to CPLR 308(1). Thus, the instant action was timely recommenced pursuant to either CPLR 205(a) or 205-a insofar as asserted against [borrower 1]…. With respect to [borrower 2], service was effected on January 7, 2019, pursuant to CPLR 308(2), which was within six months after the termination of the [2015] action. However, the affidavit of service was not filed until January 9, 2019, and service was thus completed 10 days later on January 19, 2019 (see CPLR 308[2]), which was 2 days after the six-month deadline to recommence the foreclosure action under CPLR 205-a. [Citations, internal quotation marks and brackets omitted.] It should be noted that the motion practice before the motion court occurred prior to the enactment of FAPA but FAPA is to be retroactively. Thus, the Court also found that the lender’s challenge to the retroactive application of FAPA to be “without merit”. [9] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] For the younger folks who missed out on some good television when there were only 5 channels to watch, follow the YouTube link  to a relevant “Get Smart” clip. [2] The purpose of CPLR 205(a) is briefly discussed [ here ] in a prior BLOG article. [3] This BLOG has addressed issues related to FAPA. To find such articles please see the BLOG  tile on our website  and type “FAPA” in the “search” box. [4] This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG  tile on our website  and search for any foreclosure, or other commercial litigation, issues that may be of interest you. [5] This Blog has written about CPLR 205 and the new 205-A. See, e.g., [ here ], [ here ] and [ here ]. [6] This BLOG has written numerous articles about RPAPL 1304. To find such articles, visit the “ BLOG ” tile on our website  and enter “1304” in the “search” box. [7] This BLOG has addressed issues related to RPAPL 1501(4). To find such articles please see the BLOG  tile on our website  and type “1501(4)” in the “search” box. [8] This BLOG has written numerous articles about acceleration and deacceleration of residential mortgages. To find such articles, visit the “ Blog ” tile on our website  and enter “accelerate,” “acceleration,” “deaccelerate” and/or “deacceleration” in the “search” box. [9] This BLOG has written about the retroactive application of FAPA. See, e.g., [ here ], [ here ] and [ here ].

By: Jonathan H. Freiberger Last Week in our BLOG article: “ It’s Unanimous – The Fourth Department Joins the Other Departments and Confirms the Retroactive Application of FAPA ,” we again discussed FAPA and noted that on November 25, 2025, the New York Court of Appeals decided two cases: Article 13 LLC v. Ponce De Leon Fed. Bank , and Van Dyke v. U.S. Bank, N. A. , in which the Court determined that retroactive application of FAPA’s provisions passes constitutional muster under the United States and New York Constitutions. [1] Today we will discuss Van Dyke  and next week we will discuss Article 13 LLC . FAPA The Foreclosure Abuse Prevention Act  (“FAPA”), which went into effect in December of 2022, “represents the Legislature’s response to litigation strategies and certain legal principles that distorted the operation of the statute of limitations in foreclosure actions.” Genovese v. Nationstar Mortgage LLC , 223 A.D.3d 37, 41 (1 st Dep’t 2023) (citation omitted). Thus, inter alia , FAPA’s provisions were designed to prevent lenders from circumventing statute of limitations problems in residential mortgage foreclosure actions by the simple expedient of accelerating and de-accelerating loans to restart the running of statutes of limitations. One of the main purposes of FAPA was to overrule the Court of Appeals decision in Freedom Mortgage Corp. v. Engel , 37 N.Y.3d 1 (2021), in which the Court held that if a lender accelerates a loan by the service of a foreclosure complaint, the lender’s discontinuance of that action is an “affirmative act” sufficient to de-accelerate the loan. As is relevant to today’s discussion, “[s]ections 4 and 8 of FAPA overrule components of FAPA.” Van Dyke  at *3. Section 4 of FAPA prevents a party from unilaterally resetting the statute of limitations on, inter alia , a residential mortgage note once the limitations period has accrued. Section 8 prevents a lender from resetting the limitations period to sue on, inter alia , a residential mortgage note by the voluntary discontinuance of a foreclosure action. Finally, “section 7 of FAPA estops a noteholder in a successive foreclosure action from challenging the validity of a loan acceleration made ‘prior to, or by way of commencement of’ a prior foreclosure action, unless the court in the prior action expressly determined, based on a timely raised defense, that the acceleration was invalid.” Id . Finally, section 10 of FAPA “provides that FAPA ‘shall take effect immediately and shall apply to all actions commenced on[, as relevant here, a residential mortgage loan agreement,] in which a final judgment of foreclosure and sale has not been enforced.’” Van Dyke In 2009, borrower (the plaintiff herein) defaulted on a loan secured by a mortgage and later that year the present lender’s (U.S. Bank) predecessor (BONY Mellon) commenced a foreclosure action (the “2009 Foreclosure Action”). In its complaint in the 2009 Foreclosure Action, the plaintiff lender (BONY Mellon) purported to accelerate the loan and alleged that it was the holder of the subject note or was authorized by the holder to commence the 2009 Foreclosure Action. The borrower asserted a lack of standing defense in its answer. The facts suggest that the lender in the 2009 Foreclosure Action (BONY Mellon) was not assigned the underlying promissory note until after that Action was commenced. Nonetheless, the 2009 Foreclosure Action was pending for more than ten years, during which time the underlying note and mortgage were assigned by BONY Mellon to U.S. Bank. The motion court denied the parties’ subsequent cross-motions for summary judgment on the issue of BONY Mellon’s standing to commence the 2009 Foreclosure Action due to the existence of fact issues related to BONY Mellon’s possession of the note at the commencement of that action. The parties’ cross-appeals were affirmed by the Appellate Division in 2020. In 2022, the 2009 Foreclosure Action was discontinued by a “So Ordered” stipulation that stated: “‘based upon’ Supreme Court's affirmed order denying summary judgment on the issue of [BONY]Mellon's standing, [BONY]Mellon had ‘failed to demonstrate that it had standing to commence the action.’” (Internal brackets omitted.) Further, the “stipulation did not address or purport to revoke [BONY] Mellon's purported acceleration of the loan.” In 2022, after the voluntary dismissal of the 2009 Foreclosure Action, the lender (U.S. Bank) commenced a new foreclosure action (the “2022 Foreclosure Action”) and, pursuant to RPAPL 1501(4), the borrower commenced the subject quiet title action (the “Quiet Title Action”). [2]  In the complaint in the Quiet Title Action, the borrower alleges that the lender (U.S. Bank) accelerated the underlying loan more than six years earlier and, therefore, any action on the note and mortgage would be time-barred. The lender (U.S. Bank) moved to dismiss arguing that the loan was not validly accelerated in the 2009 Foreclosure Action and the borrower cross-moved for summary judgment. During the pendency of both motions, FAPA was enacted and the parties submitted supplemental briefing on the issue. The motion court issued orders resolving the motions in the borrower’s favor. First, the court held that, pursuant to section 7 of FAPA, the lender is estopped from challenging the validity of BONY Mellon’s acceleration of the loan by the complaint in the 2009 Foreclosure Action and, accordingly, the limitations period in which to sue on the underlying obligation has expired. Additionally, the court rejected the challenge to the retroactive application of FAPA. The Appellate Division unanimously affirmed, and leave was granted to appeal to the Court of Appeals. The Court of Appeals affirmed. First, the Court determined that sections 4, 7 and 8 of FAPA apply retroactively. The Court noted that retroactive application of statutes is not favored absent clear intent by the Legislature. Van Dyke  at *5. Here, the Court found clear intent for the retroactive application of FAPA based on the legislative history and FAPA’s plain text. [3] Next, the Court discussed its rejection of the lender’s argument that retroactive application of FAPA would violate its substantive and procedural due process rights under the United States constitution. As to the substantive due process challenge, the Court recognized that “legislation can implicate substantive due process where it takes away or impairs vested rights in respect to transactions or considerations already past, and where its retroactive application lacks an adequate rational basis. [Lender]'s substantive due process challenge raises both issues.” (Citations, internal quotation marks and ellipses omitted.) The lender articulated two vested property rights: (1) its property interest in the mortgage; and, (2) its interest in prosecuting the 2022 Foreclosure Action which, the lender argues, “was timely under the pre-FAPA laws in effect when the action was brought.” The lender’s arguments were rejected by the Court. As to the property interested in the mortgage, the Court noted that “it is the six-year statute of limitations, not FAPA itself, that has extinguished that interest.” Similarly, the estoppel bar of FAPA’s section 7 does not unconstitutionally impair any property rights in the mortgage. The Court further rejected the lender’s argument that FAPA sections 4 and 8 infringe on its property interest because “but for FAPA, the filing of [BONY] Mellon's 2009 foreclosure complaint did not trigger the limitations period in the first place, on the theory that under pre-FAPA law, the discontinuance of Mellon's 2009 action rendered Mellon's acceleration a ‘legal nullity.’” The lender argued that “retroactively giving that ‘nullity’ legal effect, FAPA has extinguished [lender]'s property interest.” The Court stated that such a position is not supported by case law; “certainly not in a manner capable of conferring a vested right.” In rejecting a claimed vested right in prosecuting the 2022 Foreclosure Action, the Court stated that “assuming, without deciding, that a party may have a vested right in a timely commenced cause of action, [the lender] has not established as a legal matter that the 2022 [F]oreclosure [A]ction was timely brought under well-settled pre-FAPA law, and thus has not shouldered its ultimate burden of demonstrating FAPA's constitutional invalidity as applied here.” (Citations, internal quotation marks and brackets omitted.) Due process, according to the Court, also requires that retroactive application be supported by “a legitimate legislative purpose furthered by rational means.” (Citations and internal quotation marks omitted.) The Court recognized that there was a rational basis for applying FAPA’s relevant provisions to the action based on the abusive litigation practices employed by lenders prior to FAPA’s enactment. Also, to the extent that FAPA clarifies or alters the application of the six-year statute of limitations, retroactive application “rationally advances the strong public policy favoring finality, predictability, fairness and repose in human affairs.” (Citations and internal quotation marks omitted.) The lender further argued that its procedural due process rights under the United States Constitution were adversely impacted because when the Legislature’s shortens applicable limitation periods, the parties must be afforded “a reasonable grace period in which to bring claims that were timely under the old limitations period but are untimely under the new limitations period.” (Citation omitted.) The Court rejected this argument and noted that FAPA “did not shorten the limitations period, [therefore,] procedural due process does not demand a reasonable grace period before FAPA's relevant provisions take effect.” The Court also rejected the lender’s challenge based on the Contract Clause of the United States Constitution, which prohibits a state law from operating “as a substantial impairment of a contractual relationship.” (Citations and internal quotation marks omitted.) With respect to a Contract Clause analysis, the Court stated that the: initial inquiry contains three components: whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial. Even where all three components are satisfied, the Contract Clause is not violated if the impairment has a significant and legitimate public purpose, and if the adjustment of the rights and responsibilities of contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation's adoption. Furthermore, unless the State itself is a contracting party, as is customary in reviewing economic and social regulation, courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure. [Citations, internal quotation marks and brackets omitted.] Here, the Court concluded that even if the lender’s contractual rights were substantially impaired, the “necessity and reasonableness” of the provisions address questionable litigation practices and advance strong public policy considerations. Thus, the Court held that there are no Contract Clause violations.   Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG  tile on our website  and search for any foreclosure, or other commercial litigation, topics that may be of interest you. As relates to today’s article, type “FAPA,” “statute of limitations,” “Engel,” “acceleration,” “quiet title” or “1501(4)” into the “search” box. [2]  This BLOG has written numerous of articles addressing RPAPL 1501(4). To find such articles, please see the BLOG  tile on our website  and type “1501(4)” into the “search” box. [3] The Court based its discussion of the law in Article 13 LLC . Accordingly, the issue of retroactivity will be discussed in more depth in next Friday’s BLOG article.

Under Limited Liability Company Law §  609(a), a member or manager of a limited liability company is not personally liable for the LLC’s debts, obligations, or liabilities solely by reason of being a member or acting in that capacity. Applying this rule, the courts in 27-21 27th St. Sponsors, LLC v. Kanta , 2026 N.Y. Slip Op. 01273 (1st Dept. Mar. 05, 2026), held that a minority member of an LLC could not be sued individually for the LLC’s obligations, as the operating agreement likewise disclaimed member liability. The courts further found the promissory note at issue was criminally usurious on its face: its capped $306,000 return on an $850,000 principal reflected a 36% interest rate, exceeding New York’s civil and criminal usury limits. Because a criminally usurious instrument is void ab initio, both the note and the minority member’s guarantee were unenforceable. Equitable claims, including unjust enrichment, were also dismissed as precluded. 27-21 27th St.  arose out of plaintiff’s investment in the construction of a condominium building via a convertible promissory note (the “Note”) given by defendant KST2 Properties, LLC (“KST2”) and guaranteed by defendant Kenneth Tolley (“KT”) and defendant Janos Kanta (“JK”) (“Defendants”). The latter was the managing member, and the former the minority member, of KST2 at the time the Note was given.  The Note provided that it would accrue interest at “the highest rate permissible by law per annum, accruing monthly in a separate capital account created by [plaintiff], and payable during the term in a maximum capped payment of [$306,000.00].” The same cap applied to the guarantee. The Note further provided that it was subject “to the express condition that at no time shall [KST2] be required to pay interest at a rate which may be deemed usurious, and if any interest charged hereunder is deemed to be in excess of the maximum legal rate, then the interest rate hereunder shall immediately be reduced to the maximum legal rate.” Plaintiff commenced the action to recover under the Note and guarantee, as well as recover its share of the profits of the sale of the condominium building, and a declaratory judgment that it was a member of KST2.  The first and fourth causes of action asserted against Defendants arose out of the KST2 operating agreement. Generally, “a member of a limited liability company . . . is [not] liable for any debts, obligations or liabilities of the limited liability company or each other, whether arising in tort, contract or otherwise, solely by reason of being such member, manager or agent or acting (or omitting to act) in such capacities or participating (as an employee, consultant, contractor or otherwise) in the conduct of the business of the limited liability company.” [1]  Similar to the LLCL, the KST2 operating agreement provided that “no Member shall be personally liable for any debt, losses or obligations of the Company by virtue of being a Member.” In the fourth cause of action, plaintiff sought to enforce KST2’s obligation to distribute the profits of the condominium sale. The motion court held that with respect to the first cause of action for a declaratory judgment, it was properly brought against the company, rather than against the members directly, such as KT.  Thus, plaintiff’s claim against KT was improper.  Turning to the sixth cause of action for breach of the guarantee, the motion court addressed KT’s argument that the Note was usurious. KT argued that, as a guarantor of the Note, [2]  the Note’s maximum accrued interest of $306,000.00 on the principal amount of $850,000 over one year, which into an interest rate of 36%, well in excess of the civil and criminal usury rates of 16% and 25%, respectively. [3]   Under New York law, usury applies to a “loan or forbearance of any money, goods or things in action.” [4]   “[I]t must appear that the real purpose of the transaction was, on the one side, to lend money at usurious interest reserved in some form by the contract and, on the other side, to borrow upon the usurious terms dictated by the lender.” [5]  Notably, “[t]he court will not assume that the parties entered into an unlawful agreement.” [6]  “[W]hen the terms of the agreement are in issue, and the evidence is conflicting, the lender is entitled to a presumption that he did not make a loan at a usurious rate” [7] However, “[i]f usury can be gleaned from the face of an instrument, intent will be implied and usury will be found as a matter of law.” [8]   The motion court held that the Note was criminally usurious on its face. The motion court explained that the Note provided that interest would accrue at “the highest rate permissible by law per annum . . . payable during the term in a maximum capped payment of [$306,000.00].” The highest rate permissible by law, noted the motion court, is 16%, as set by the General Obligations Law and the Banking Law. Interest of 16% on the $850,000 principal yields interest of $136,000, rather than the maximum capped payment of $306,000.  The motion court rejected plaintiff’s argument that because $306,000 was merely the maximum payment of interest possible, the reference to the maximum allowable legal rate acted as a savings clause, effectively preventing any usurious interest rate from actually applying. The motion court also rejected plaintiff’s argument that a provision of the Note, in effect, acted to reform the Note if KST2 was ever charged a usurious rate of interest. In rejecting the arguments, the motion court held that such language did not preserve an agreement that was usurious on its face. [9]   The motion court also rejected plaintiff’s argument that because KST2 drafted the language at issue, plaintiff should be relieved of the consequences of lending at usurious rates. [10]   Moreover, the motion court rejected plaintiff’s argument that KT owed plaintiff a fiduciary duty as a member of KST2. The motion court explained that plaintiff did not join KST2 until several months after the Note and guarantee were executed. Thus, the transaction was at arm’s length and did not give rise to equitable estoppel. [11] Further, the motion court dismissed the eleventh cause of action seeking relief for unjust enrichment. Plaintiff claimed that KT had been unjustly enriched at plaintiff’s expense by the failure to repay under the guarantee and to receive its share of the profits from the sale of the condominium. The motion court noted that those obligations were covered by the Note and the KST2 operating agreement, respectively. Given “[t]he existence of a valid and enforceable written contract governing a particular subject matter,” explained the motion court, plaintiff’s was precluded from “recovery in quasi contract for events arising out of the same subject matter.” [12]   Finally, noted the motion court, plaintiff could not recover in quasi contract because a lender that has charged criminally usurious interest may not recover on an equitable claim such as unjust enrichment. [13]   On appeal, the Appellate Division, First Department, unanimously affirmed. The Court held that “the motion court properly dismissed the first and fourth claims for declaratory relief and breach of the operating agreement against [KT] individually.” [14]  First, said the Court, KT “was not properly named in the cause of action for a declaration that plaintiff is a member of KST2 because ‘[a] member of a limited liability company is not a proper party to proceedings by or against a limited liability company, except where the object is to enforce a member's right against or liability to the limited liability company.’” [15]   The Court found “[p]laintiff’s attempt to hold [KT] personally liable for KST2’s acts unavailing because ‘[n]either a member of a limited liability company, a manager of a limited liability company managed by a manager or managers nor an agent of a limited liability company . . . is liable for any debts, obligations or liabilities of the limited liability company or each other.’” [16]   The Court further found that “nothing in the operating agreement suggest[ed] that [KT] intended to be personally liable for KST2’s acts.” [17] Pointing to the operating agreement, the Court noted that the agreement expressly disclaimed the liability of members “for any debt, losses or obligations” of KST2, consistent with LLCL § 609(a), except to the extent of members’ individual capital contribution. [18]  “This language, said the Court, “negate[d] any inference of liability arising from [KT’s] having signed the operating agreement in his individual capacity for anything other than a claim related to his capital contribution, warranting dismissal of the fourth cause of action as against him.” [19] The Court also held that the “motion court properly found that because the promissory note was civilly and criminally usurious on its face, it, and by extension [KT’s] guarantee, were void ab initio.” [20]  The Court noted that “[a]lthough corporations and their guarantors may not raise the defense of civil usury, that prohibition [did] not apply to criminal usury.” [21]   The Court held that the motion court “correctly determined that the $306,000 maximum return reflected an interest rate of 36%, well above the civil and criminal usury rates of 16% and 25%, respectively.” [22]  “Based on the language in the [N]ote,” said the Court, the motion “court properly rejected plaintiff’s contention that the [N]ote was enforceable because the $306,000 was intended to be a return on a preferred equity investment rather than interest, as the conversion to an equity interest would not preclude the application of the usury laws.” [23] The Court further held that the motion court “properly found that a usurious interest rate [could not] be salvaged by language providing that the intent is to collect the highest legal maximum interest rate.” [24]   “Because an instrument seeking a criminally usurious interest rate is void,” concluded the Court, “the guarantee [was], too.” [25]   Addressing plaintiff’s argument that it was KST2’s managing member and personnel who drafted the note, the Court held that “a note with a usurious interest rate is void, irrespective of which party drafted it.” [26]  Although the Court has recognized a limited exception to the foregoing rule where “[a] borrower, who, because of a fiduciary or other like relationship of trust with the lender, is under a duty to speak and . . . fails to disclose the illegality of the rate of interest he proposes,” [27]  the Court held that plaintiff failed “to plead facts sufficient for this exception to apply, as the usurious note was not signed by [KT], and there [were] no allegations that [KT] participated in its drafting or proposed the interest rate.” [28] Finally, the Court held that “the motion court properly dismissed the unjust enrichment claim as precluded by the parties’ written agreements.” [29] The Court explained that “an equitable claim is not available to resuscitate an agreement found to be void based on criminal usury.” [30] Takeaway 27-21 27th St.  reinforces the protection from liability afforded to LLC members under New York law. Section 609(a) of the LLCL establishes that members and managers are not personally liable for the debts or obligations of the LLC merely because of their status, and the courts in 27-21 27th St.  applied that rule strictly. The operating agreement for KST2 mirrored this statutory protection, and nothing in the agreement suggested that the minority member assumed personal liability for the Note. Consequently, both the motion court and the First Department held that defendant could not be sued individually for obligations arising from KST2’s contracts or its internal profit‑distribution duties. 27-21 27th St.  also reaffirms the law on usury. The Note’s capped $306,000 return on an $850,000 investment translated to an interest rate of 36%, making the note criminally usurious on its face. Under New York law, a criminally usurious instrument is void ab initio, and because the guarantee stands or falls with the note, the minority member’s guarantee was void as well. The motion court and the First Department rejected plaintiff’s arguments that savings‑clause language or the characterization of the investment as “preferred equity” could salvage the agreement. Finally, 27-21 27th St.  underscores that equitable claims cannot be used to revive rights under a void usurious contract. Because valid written agreements governed the parties’ relationship, and because usury bars equitable recovery, the unjust‑enrichment claim failed. ______________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions and not on matters handled by the firm. _______________________________ [1] Limited Liability Company Law (“LLCL”) § 609(a). [2]  A guarantor of the note may raise the usury defense belonging to the principal debtor. Fred Schutzman Co. v. Park Slope Advanced Med., PLLC , 128 A.D.3d 1007, 1008 (2d Dept. 2015). [3] General Obligations Law (“GOL”) § 5-501; Banking Law § 14-a; Penal Law § 190.40). [4] GOL § 5-501; Donatelli v. Siskind , 170 A.D.2d 433, 434 (2d Dept. 1991). [5] Donatelli , 170 A.D.2d at 434. [6] Giventer v. Arnow , 37 N.Y.2d 305, 309 (1975). [7] Id. [8] Blue Wolf Capital Fund II, L.P. v. American Stevedoring Inc. , 105 A.D.3d 178, 183 (1st Dept. 2013). [9] Bakhash v. Winston , 134 A.D.3d 468, 469 (1st Dept. 2015); Simsbury Fund, Inc. v. New St. Louis Assocs. , 204 A.D.2d 182, 182 (1st Dept. 1994). [10] Bakhash , 134 A.D.3d at 469. [11] Kingsize Entertainment, LLC v. Martino , 155 A.D.3d 856, 857 (2d Dept. 2017). [12] Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co. , 70 N.Y.2d 382, 388 (1987). [13] Blue Wolf Capital , 105 A.D.3d at 184. [14] Slip Op. at *1. [15] Id.  (citing LLCL § 610). [16] Id.  (quoting LLCL § 609(a). [17] Id. [18] Id. [19] Id. [20] Id.  (citing Blue Wolf Capital , 105 A.D.3d at 183). [21] Id.  (citing GOL § 5-521(1), (3)). [22] Id.  (citing GOL § 5-501(2); Banking Law § 14-a(1); Penal Law § 190.40). [23] Id.  (citing Adar Bays, LLC v. GeneSYS ID, Inc. , 37 N.Y.3d 320337 (2021)). [24] Id.  (citing Bakhash v .Winston , 134 A.D.3d 468, 469 (1st Dept. 2015)). [25] Id.  (citing Blue Wolf Capital Fund , 105 A.D.3d at 184). [26] Id.  (citing Bakhash , 134 A.D.3d at 469). [27] Pemper v. Reifer , 264 A.D.2d 625, 626 (1st Dept. 1999). [28] Id. [29] Id. [30] Id.  (citing  Blue Wolf Capital , 105 A.D.3d at 184;  Sorenson v. Winston & Strawn, LLP , 162 A.D.3d 593, 593 (1st Dept. 2018)).

By: Jeffrey M. Haber Financial exploitation of seniors and vulnerable adults is a significant problem.¹ It is considered by many to be an insidious non-violent form of elder abuse in the United States. While a landmark MetLife study initially estimated that older Americans lose roughly $2.6 to $2.9 billion each year to financial exploitation, more recent research suggests that the cost may be materially higher, potentially exceeding $36 billion annually. These numbers, whether at the low end of the range or the high end, reflect not only a financial loss of assets but also an emotional harm inflicted on victims and their families. Financial exploitation occurs when an individual – often someone in a position of trust – misappropriates, misuses, or steals the assets of a senior or otherwise vulnerable person. This can happen without the victim’s knowledge, or under circumstances where they do not fully understand or consent to the transactions being conducted. According to a study by the New York State Office of Children and Family Services, an estimated five million older adults and vulnerable Americans experience some form of financial exploitation every year, highlighting how pervasive and underreported this issue truly is. In the investment context, the forms of exploitation are varied but often share a common theme: the pursuit of high commissions or personal gain by unethical financial professionals. Among the most prevalent abuses are churning (excessive trading to generate fees), unauthorized transactions, unsuitable investment recommendations, improper portfolio concentration in high-risk products, misappropriation of assets, and misrepresentations about an investment’s risk, characteristics, or likely returns. These tactics often deplete accounts, expose seniors and vulnerable adults to outsized risks, or leave them financially devastated at a stage of life when recovery is challenging at best. A major reason for this vulnerability lies in the trust that seniors place in the professionals on whom they rely. Many older adults are unfamiliar with the complexities of financial markets or investment products. They often place significant trust in stockbrokers, financial advisors, investment advisers, and insurance agents – individuals who are supposed to act in their best interests. This trust, coupled with a reluctance to question what they do not understand, creates opportunities for abuse by those who exploit their authority or clients’ good faith. Because many seniors may not recognize exploitation immediately – or may feel embarrassed or intimidated about reporting it – prevention often depends on attentive, proactive involvement from family members, friends, and other trusted individuals. Regular oversight, open communication, and periodic review of financial statements can serve as early-warning tools to spot problems before significant harm occurs. In addition to the oversight of friends and family, regulatory oversight plays an important role in the protection of seniors and vulnerable adults from financial elder abuse.² On January 30, 2026, the Securities and Exchange Commission announced that it filed a settled action against a Georgia resident (“Defendant”) for allegedly breaching his fiduciary duties to an elderly investment advisory client³ and misappropriating more than $9.8 million of the client’s assets. Defendant agreed to pay more than $13 million to settle the charges. According to the complaint filed by the SEC in the United States District Court for the Northern District of Georgia, in March 2022, Defendant began misappropriating the client’s assets as well as assets from the estate of the client’s recently deceased sister. The SEC alleged that in February 2023, Defendant, without the client’s knowledge or consent, opened a brokerage account for one of the client’s trusts and transferred more than $9 million in securities from the client’s other accounts.⁴ While establishing the new brokerage account, Defendant allegedly took several steps to conceal his continuing misappropriation of assets, including authorizing the use of check writing from the account, setting up the log-in credentials for the account so that he could access and control the account, and creating an e-mail account to electronically impersonate the client. As alleged, Defendant then misappropriated the client’s funds for his own benefit, including building a multi-million-dollar residence, purchasing vehicles, and buying vacation homes. The SEC charged Defendant with violating Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rules 10b-5(a) and (c) thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.⁵ Without denying the SEC’s allegations, Defendant agreed to the entry of a final judgment, subject to court approval, in which he agreed to be permanently enjoined from violating the charged provisions of the federal securities laws and from participating in the issuance, purchase, offer, or sale of any security, except for purchases or sales of securities listed on national exchanges in his own personal accounts, and to pay $9,025,424.89 in disgorgement with prejudgment interest of $1,029,626.64 and a civil penalty of $3,000,000. ____________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. ¹We have written about enforcement actions and litigations involving the exploitation of seniors and vulnerable adults on numerous occasions, including: SEC Receives Temporary Restraining to Halt the Financial Exploitation and Abuse Of Seniors; Enforcement News: SEC Charges Broker with Scheme to Defraud Mostly Elderly Retail Brokerage Customers and Investment Advisory Clients; Enforcement News: SEC Seeks Emergency Relief Against Investment Adviser Targeting Senior Investors “in a Classic Ponzi Scheme”; First Department Sustains Undue Influence and Unjust Enrichment Claims in Financial Exploitation Case; and Enforcement News: Ponzi-Like Scheme, Elder Financial Exploitation and Affinity Fraud. ²We wrote about regulatory efforts to protect seniors and vulnerable adults in the following articles: Bipartisan Legislation Introduced to Protect Seniors from Financial Abuse and Exploitation; The SEC Approves FINRA’s New Rules to Address the Financial Exploitation and Abuse of Seniors; and FINRA Submits New Rule for SEC Approval to Protect Seniors and Other Vulnerable Adults from Financial Exploitation and Fraud. ³According to the SEC, the client suffered from significant health issues and depended almost entirely on Defendant for both financial and personal needs, including paying bills, arranging a caretaker, purchasing groceries and household supplies, and managing his mail. ⁴The SEC claimed that Defendant allegedly obtained signatory authority over the client’s primary bank account and then misappropriated another $8.94 million. ⁵The Financial Industry Regulatory Authority barred Defendant in December 2025, for failing to produce documents and information requested in its investigation.

By: Jeffrey M. Haber As readers of this Blog know, affinity fraud and Ponzi schemes often intersect because each reinforces the weaknesses of the other, creating a powerful and deceptive form of financial exploitation.¹ Affinity fraud is a form of financial deception that exploits the trust and social cohesion within a close‑knit group. These groups may be defined by shared religious beliefs, cultural or ethnic identity, professional affiliations, or community networks. The fraud typically begins when an individual – often someone who appears to be a respected or long‑standing member of the community – presents an investment or financial opportunity that seems credible precisely because it comes from a familiar source. The perpetrator leverages the group’s internal bonds to build legitimacy, frequently encouraging early participants to recommend the opportunity to others. Because recommendations circulate through trusted personal relationships, skepticism is limited, and formal due diligence is often bypassed. The fraudster may reinforce the illusion of success by reporting fictious returns or by making small initial payments to early investors, thereby strengthening confidence in the scheme. As the fraud spreads within the group, participants invest not only their financial resources but also their interpersonal trust. Eventually, however, the scheme collapses – often when it becomes impossible to attract additional funds. The resulting losses extend beyond financial harm. Communities experience strained relationships, diminished trust, and, in some cases, long‑lasting reputational damage. In essence, affinity fraud is particularly pernicious because it preys not on financial naïveté alone, but on trust – that is, trust with those on whom people share an identity, values, or history. A Ponzi scheme typically begins with an investment enterprise that purports to offer unusually stable and inflated returns. The promoter, who often embodies a veneer of expertise and professional legitimacy, positions the investment as a “can’t lose” opportunity. The investment strategy is often framed in abstract or proprietary terms, discouraging scrutiny while appealing to individuals who fear missing out on access to high‑yield financial vehicles. In its early stages, the scheme functions as represented, primarily because its obligations remain limited. Initial investors receive the returns they were promised, not through legitimate asset appreciation, but through the redirection of funds supplied by newly recruited participants. These early “returns” and payments play a critical role: they serve as evidence of the promoter’s competence and create validation. Investors often respond by increasing their contributions or by introducing additional participants, amplifying the scheme’s growth through emergent network effects rather than through genuine investment performance. Over time, the fragility of the scheme becomes increasingly pronounced. Because it lacks a legitimate economic foundation, its survival depends entirely on the continuous and accelerating inflow of capital. Even minor disruptions, such as the slowdown in recruitment, an increase in withdrawal requests, or the emergence of external regulatory attention, can destabilize the scheme. Once incoming funds no longer exceed or at least match outgoing obligations, the scheme’s financial obligations become unsustainable. The collapse is typically abrupt: promised payments cease, liquidity evaporates, and the underlying deception comes to light. The aftermath of a Ponzi scheme extends beyond financial loss. Victims frequently report long‑term erosion of trust in financial intermediaries, regulatory institutions, and social networks associated with the promoter. For many, the most acute harm arises not merely from monetary depletion but from the psychological dissonance created by having relied on assurances that, in retrospect, appear implausible. In today’s article, we examine SEC v. Likhtenstein, Case No. 1:25-cv-05412 (E.D.N.Y.), an enforcement action that the SEC brought against Marat Likhtenstein (“Defendant”) for perpetrating a Ponzi-like scheme primarily targeting the Russian American Jewish community. According to the SEC, from at least April 2017 through June 2024, Defendant, while acting as an investment adviser, solicited, recommended, and sold self-issued investments in the form of promissory notes that raised more than $4.1 million from at least 15 advisory clients. The SEC alleged that Defendant falsely told his clients, many of whom were elderly², that if they purchased promissory notes from him through his “side business,” they would earn extraordinary interest rates through investments in highly lucrative business opportunities and deals. However, said the SEC, Defendant did not actually invest the investors’ funds. Instead, he allegedly misappropriated their funds by making $940,000 in Ponzi-like payments to other investors and by spending almost $3.2 million on his personal expenses. The SEC filed its complaint in the U.S. District Court for the Eastern District of New York. The SEC charged Defendant with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC sought a final judgment ordering Defendant to pay disgorgement, prejudgment interest, and civil penalties, as well as enjoining him from violating the charged provisions and imposing conduct-based injunctions. Defendant, without admitting or denying the allegations, consented to a bifurcated settlement, agreeing to the injunctive relief, with monetary relief to be determined at a later date. On February 4, 2026, the Court entered the consent judgment.³ _________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. ¹Previously, we examined SEC enforcement actions involving affinity fraud and Ponzi schemes in numerous articles, including: Enforcement News: SEC Brings Emergency Action Against Alleged Perpetrators of an Affinity Fraud and a Ponzi Scheme; Enforcement News: The Intersection of Affinity Fraud and a Ponzi Scheme; Enforcement News: A Double Shot of Ponzi Schemes with a Dose of Affinity Fraud; Enforcement News: SEC Files Complaint in Connection with a $300 Million Ponzi Scheme and Affinity Fraud; and Enforcement News: Affinity Fraud and Ponzi Schemes in the News Again. ²This Blog has examined financial elder abuse on numerous occasions. See, e.g., SEC Receives Temporary Restraining to Halt the Financial Exploitation and Abuse of Seniors, and Enforcement News: Ponzi-Like Scheme, Elder Financial Exploitation and Affinity Fraud. To find the articles related to financial elder abuse or financial exploitation of seniors, visit the “Blog” tile on our website and enter “financial elder abuse” in the “search” box. ³ECF Dkt. No. 8.

By: Jonathan H. Freiberger This BLOG has written numerous articles addressing statutes of limitation.¹ Today’s article discusses Mark v. Trimarco , a case decided by the Appellate Division, Second Department, on February 4, 2026, in which the plaintiff unsuccessfully attempted to breathe new life into an otherwise expired limitations period to sue on a promissory note. The statute of limitations on a promissory note is six years. CPLR 213(2) ; see also Carpenito v. Linksman , 197 A.D.3d 553, 554 (2 nd Dep’t 2021). However, an expired statute of limitations can be revived in numerous ways. As noted in this BLOG’s article “Revive a Time-Barred Claim Using §17-101 of New York’s General Obligations Law,” “the primary purpose of Statutes of Limitation is to relieve defendants of the necessity of investigating and preparing a defense where the action is commenced against them after the expiration of the statutory period because the law presumes that by that time evidence has been lost, memories have faded and witnesses have disappeared.” Connell v. Hayden , 83 A.D.2d 30 (2 nd Dep’t 1981). This problem may be ameliorated by General Obligations Law §17-101, which provides that “n acknowledgment or promise contained in a writing signed by the party to be charged thereby is the only competent evidence of a new or continuing contract whereby to take an action out of the operation of the provisions of limitations of time for commencing actions under the civil practice law and rules other than an action for the recovery of real property….” Invocation of GOL §17-101, requires “a signed writing which validly acknowledges the debt.” Mosab Const. Corp v. Prospect Park Yeshiva, Inc. , 124 A.D.3d 732, 733 (2 nd Dep’t 2015) (citations and internal quotation marks omitted). “To constitute an acknowledgement, a writing must be signed and recognize an existing debt and must contain nothing inconsistent with an intention on the part of the debtor to pay it.” Karpa Realty Group, LLC v. Deutsche Bank Nat. Trust Co. , 164 A.D.3d 886, 888 (2 nd Dep’t 2018) (citations and internal quotation marks omitted). Signatures can be added to a writing manually or electronically. As to the latter, the New York State Technology Law addresses circumstances where one can be bound by “electronic signatures.” Thus, the conclusion that an email can be deemed a signed writing: is buttressed by reference to the New York State Technology Law, former article 1, “Electronic Signatures and Records Act,” which was enacted by the Legislature in 2002. In the accompanying statement of legislative intent, the Legislature stated in part: “ This act is intended to support and encourage electronic commerce and electronic government by allowing people to use electronic signatures and electronic records in lieu of handwritten signatures and paper documents” (L 2002, ch 314, § 1). Section 302(3) of this statute states that an “‘lectronic signature’ shall mean an electronic sound, symbol, or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record.” Section 304(2) of the statute states that “an electronic signature may be used by a person in lieu of a signature affixed by hand he use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand.” Forcelli v. Gelco Corp. , 109 A.D.3d 244, 250-251 (2 nd Dep’t 2013).² Another way that a statute of limitations can be renewed is “by partial payment of principal or interest which has the effect of an acknowledgement or new promise to pay under the note.” Aldridge v. LNG Enterprises, Inc. , 220 A.D.3d 1178, 1179 (4th Dep’t 2023) (citations, internal quotation marks, brackets and ellipses omitted). The prior discussion leads back to Mark. In 2007, the defendant in Mark delivered a promissory note to the plaintiff promising to pay $75,000 the following year. In 2017, the plaintiff commenced an action to collect on the promissory note. As one would expect, the defendant raised a statute of limitations defense. At a non-jury trial: the plaintiff introduced into evidence an email sent by the defendant to the plaintiff in June 2013 and two checks that the plaintiff testified were partial payments made by the defendant to the plaintiff after the limitations period had ended. The email sent by the defendant included his full name, the name of his business, and the business’s web address. The defendant testified that he did not sign the email and that his name and other information were included in the email automatically. He further testified that he made the two payments to the plaintiff to cover dermatological services for which the defendant was never billed and because the plaintiff was experiencing financial difficulties. The two checks did not include a notation or cover letter stating that they were to be used to pay the debt owed on the note. At the close of evidence, the plaintiff argued that the email and the partial payments served to extend and revive the statute of limitations. The trial court dismissed the complaint because the plaintiff’s claims were time barred and the plaintiff appealed. In affirming the trial court, the Second Department found that while the emails in question “included the defendant’s full name, the name of his business, and the business’s web address, the defendant testified that he ‘didn’t sign’ the email and that the closing was an ‘automatic’ message that ‘comes up’ on his computer.” Based on the testimony, the Court concluded that “the defendant did not intend to sign the email, and thus, the email did not serve to revive the statute of limitations.” (Relying on Forcelli and the New York State Technology Law.) The Court, in finding that the plaintiff’s “partial payment” position was unavailing, stated: Here, the two checks did not contain a memo, notation, or cover letter indicating that the defendant intended for them to constitute partial payments under the note. Moreover, the defendant testified that he sent the plaintiff the checks to help the plaintiff financially and to reimburse the plaintiff for dermatology services rendered. Thus, the checks were not accompanied by circumstances amounting to an absolute and unqualified acknowledgment of the sum due under the note from which a promise to pay the remainder may be inferred. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. ¹ To find such articles, please see the BLOG tile on our website and type “statute of limitations” into the “search” box. ² This BLOG has written numerous articles addressing email signatures and discussing Forcelli. To find such articles, please see the BLOG tile on our website and type “Forcelli” into the “search” box.