The question in this case is whether a lender’s statement that it will accelerate a defaulting borrower’s debt if the borrower does not cure its default automatically accelerates the debt if the borrower fails to cure.
In New York, the statute of limitations in a mortgage-foreclosure action is six years from when the debt becomes due. If a debt is payable in installments, each failure to pay an installment gives rise to a new cause of action, allowing the lender to bring a new action. But if a lender accelerates a debt—causing the entire loan to become due at once—then the lender has six years from acceleration to bring a foreclosure action. In other words, no more installments are due once the lender accelerates, and so no more causes of action will accrue. New York courts have long held that a lender cannot accelerate a loan unless it gives the borrower “clear and unequivocal” notice of its intent to accelerate.
This case arises from a mortgage on Juan Vargas’s property to secure a debt that Vargas owed. Vargas defaulted on the loan in 2007. In a 2008 letter, IndyMac, the lender, wrote to Vargas: “If you do not cure your default [within 32 days], we will accelerate your mortgage with the full amount remaining accelerated and becoming due and payable in full.” IndyMac later assigned the debt to Deutsche Bank.
By 2016, neither IndyMac nor Deutsche Bank had foreclosed on the mortgage, and Vargas sued Deutsche Bank to quiet title. He claimed that IndyMac’s 2008 letter had accelerated his debt, meaning that the statute of limitations to foreclose on the property ran in 2014. Deutsche Bank claimed that IndyMac’s letter did not accelerate the debt, since a letter stating that the lender will accelerate a debt at some future date does not provide the requisite “clear and unequivocal” notice of an intent to accelerate. Supreme Court rejected that argument and granted Vargas summary judgment.
The First Department unanimously affirmed. It held that IndyMac’s 2008 letter expressed “a clear and equivocal intent to accelerate the loan balance and commence the statute of limitations on the entire mortgage debt” by saying that IndyMac would accelerate the loan if Vargas failed to cure by a date certain.
The Court of Appeals granted leave to appeal.