46 N.Y.2d 569 (1979)

A subrogee inherits the residency status of the subrogor for the purpose of applying New York’s borrowing statute (CPLR 202) regarding the Statute of Limitations.

Summary

United States Fidelity & Guaranty Co. (Fidelity), as subrogee of a New York partnership, brought a conversion action against E.W. Smith Co., a Pennsylvania corporation. The case concerned whether the action was barred by the Statute of Limitations. The court held that because Fidelity stood in the shoes of its subrogor (the New York partnership), the New York statute of limitations applied, and the action was timely filed. The court also clarified the application of CPLR 202 regarding causes of action accruing outside of New York, emphasizing that the residency of the original claimant (the subrogor) is determinative. The court rejected the argument that CPLR 205(a) shortened the Statute of Limitations.

Facts

W.E. Hutton and Company, a New York brokerage firm, had stock certificates stolen from its New York office in October 1968.
E.W. Smith Company, a Pennsylvania corporation, allegedly obtained these certificates and sold them through Philadelphia brokerage houses on behalf of a customer.
United States Fidelity and Guaranty Company (Fidelity), Hutton’s insurer, paid Hutton for the loss and became subrogated to Hutton’s rights.
Smith registered to do business in New York in November 1974.

Procedural History

In 1970, Fidelity initially sued Smith in New York, alleging conversion, but the case was dismissed for lack of personal jurisdiction, and the dismissal was affirmed.
In 1977, Fidelity filed a second suit against Smith, alleging the same conversion claim, arguing that Smith’s registration to do business in New York conferred jurisdiction.
Special Term dismissed the complaint based on the Statute of Limitations.
The Appellate Division affirmed the dismissal. The New York Court of Appeals granted leave to appeal.

Issue(s)

1. Whether the Statute of Limitations was tolled under CPLR 207 until Smith came into New York by registering to do business.
2. Whether CPLR 202 requires applying Pennsylvania’s shorter Statute of Limitations because the cause of action accrued outside New York and Fidelity is a foreign corporation.
3. Whether CPLR 205(a) bars the action because it was not commenced within six months after the termination of Fidelity’s prior action.

Holding

1. Yes, because CPLR 207 applies, tolling the Statute of Limitations until Smith entered the state.
2. No, because Fidelity, as subrogee, stands in the shoes of Hutton, a New York resident, and therefore the New York Statute of Limitations applies.
3. No, because CPLR 205(a) is a grace period provision and does not shorten an otherwise validly tolled Statute of Limitations period.

Court’s Reasoning

The court found that CPLR 207 applied, which states, “If, when a cause of action accrues against a person, he is without the state, the time within which the action must be commenced shall be computed from the time he comes into or returns to the state.”
The court held that Fidelity, as the subrogee of Hutton, was entitled to the same rights and remedies as Hutton, including the benefit of New York’s Statute of Limitations. “It is the very essence of subrogation that a subrogee stands in the shoes of the subrogor and is entitled to all of the latter’s rights, benefits and remedies”.
The court referenced CPLR 202, noting that the critical factor is the residency of the person in whose favor the cause of action accrued. The court stated, “CPLR 202 provides for the application of the shorter of the two limitations periods in question ‘except * * * where the cause of action accrued in favor of a resident of the state’ (emphasis added), in which case the New York period is applicable.”
The court rejected the argument that CPLR 205(a) barred the action, stating, “Where, as here, the statutory time limit has not expired, due to a toll or otherwise, this section cannot be applied in such a way as to shorten the period otherwise available to the plaintiff”. CPLR 205(a) is meant to extend, not shorten, a Statute of Limitations.
There were no dissenting or concurring opinions.