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Petito v. Piffath – Case Brief Summary (New York)

In Petito v. Piffath, (85 NY2d 1, 647 N.E.2d 732, 623 N.Y.S.2d 520 [1994], rearg denied, 85 NY2d 858, 648 NE2d 796, 624 NYS2d 376, cert. denied, 516 US 864 [1995]), a precedent-setting case, the New York Court of Appeals held that a settlement agreement in a foreclosure action cannot constitute the borrower's acknowledgment of the debt sufficient to renew the running of the Statute of Limitations for enforcement of the debt itself.

In so holding, the Court of Appeals relied on the express language of GOL § 17-101, which provides that "an 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 CPLR."

The Court noted that the settlement agreement contained "neither an express acknowledgment of the borrower's indebtedness nor an express promise to pay the mortgage debt per se.

Rather, the agreement contained only a promise to pay plaintiff a specific sum in exchange for plaintiff's agreement to forego prosecution of its foreclosure action . . ." (85 NY2d at 7).

The Court of Appeals held that the amount paid under a settlement agreement "cannot be deemed a partial payment 'on account of the indebtedness secured by a mortgage' under GOL § 17-107 (2) (b) . . ." because the promise to pay and the partial payment only referenced the settlement agreement and "not to the mortgage debt that plaintiff sought to enforce" (Petito, 85 NY2d at 9).

Further, the payment did not satisfy the long-standing rule that "in order to make a money payment a part payment within the statute, the burden is upon the creditor to show that it was accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due" (id.)