New York Court Dismisses Foreclosure and Denies Motion to Amend to Add Fraudulent Conveyance Claim, Holding Both Are Untimely

The New York Supreme Court, Kings County, recently dismissed a foreclosure action and the lender’s motion to amend to add a claim of fraudulent conveyance, finding they were untimely.  See Deutsche Bank Nat’l Trust Co. v. Point Holding Alpha, LLC, Index No. 511835/2018 (N.Y. Sup. Ct. May 22, 2020).  In 2005, the individual homeowner signed a note and mortgage.  In August 2006, the plaintiff lender commenced a foreclosure action against the individual homeowner.  In January 2007, the individual transferred the property to the defendant LLC, and the deed was recorded in March 2007.   In 2008, the individual filed for bankruptcy and listed the property on Schedule A of his petition.  In 2013, the lender and the individual dismissed the foreclosure action without prejudice, but in 2018, plaintiff commenced this action against the defendant LLC.  Defendant filed a motion to dismiss, arguing that plaintiff accelerated the debt in 2006 and never affirmatively revoked it, which meant that the six-year limitations period had run.  Plaintiff cross-moved to amend the complaint to claim that the 2007 transfer of the property to the LLC was fraudulent. 

The Court granted defendant’s motion, denied plaintiff’s cross-motion, and dismissed the action.  The statute of limitations for a fraudulent conveyance based on actual fraud in New York is six years, or two years from the time the fraud was discovered or could have been discovered with reasonable diligence.  Here, the Court found that the property was transferred in 2007 and the deed was recorded that same year.  Likewise, the 2008 bankruptcy filing listed the conveyance and the consideration.  “Plainly, plaintiff knew or should have known of the alleged fraud many years before it commenced this action. Plaintiff’s assertion that it was unaware of the possible fraud until July 2018 is belied by the record, unconvincing, and without merit.”  Accordingly, the Court found that plaintiff’s fraud claim was untimely and denied the motion to amend.  Although the Court did not articulate its findings on whether the foreclosure was also time barred, it dismissed the foreclosure action, indicating that it found that plaintiff never revoked the acceleration of the debt and that the foreclosure also was untimely.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Anthony Lombardo at alombardo@riker.com.