Promissory Note Statue of Limitations

[Dassault5209]

Back in 2011 I entered into a promissory note agreement with my stepfather as he gave me a loan to cover lawyer fees. The note stated that the money would be paid back at an “average” of $250 a month until the loan was paid off and if it ever fell below that average 5% interest would be added to the balance. I made several payments that year and shortly after advising him to invest into a company of which he made a ton of money he verbally told me to not worry about the debt anymore because “my advice had made him plenty to cover my debt.” A few years later he started to bug me about starting to pay again which was surprising and being stupid about it and in constant fights, I started giving him a partial payment each month. He became greedy and started to say he needed more than the agreed upon amount and at that point I just stopped paying him anything. He took me to court in Delaware and I argued that the statue of limitations had been exceeded and he had no case for the debt. The judge was only concerned with the fact that I made a payment (even though it never met the terms of the loan) and awarded judgment to him. I have since appealed and was wondering what defense I have. It was over 6 years when he filed the complaint from when the “cause of action” or breach of contract occurred. What defense do I have to get judgement from the court and hold him to what he verbally told me?

 

[latigo]

Back in 2011 I entered into a promissory note agreement with my stepfather as he gave me a loan to cover lawyer fees. The note stated that the money would be paid back at an “average” of $250 a month until the loan was paid off and if it ever fell below that average 5% interest would be added to the balance. I made several payments that year and shortly after advising him to invest into a company of which he made a ton of money he verbally told me to not worry about the debt anymore because “my advice had made him plenty to cover my debt.” A few years later he started to bug me about starting to pay again which was surprising and being stupid about it and in constant fights, I started giving him a partial payment each month. He became greedy and started to say he needed more than the agreed upon amount and at that point I just stopped paying him anything. He took me to court in Delaware and I argued that the statue of limitations had been exceeded and he had no case for the debt. The judge was only concerned with the fact that I made a payment (even though it never met the terms of the loan) and awarded judgment to him. I have since appealed and was wondering what defense I have. It was over 6 years when he filed the complaint from when the “cause of action” or breach of contract occurred. What defense do I have to get judgment from the court and hold him to what he verbally told me?

I'm going to assume that the note is governed by the laws of Delaware and that the court applied Delaware's 6-year statute of limitations.

With that in mind is it your position that no payments whatsoever were made upon the note prior to the expiration of the statute?

OR are you admitting that a partial payment was made prior to the expiration date, but that the payment didn't "meet the terms of the note" and therefore the judge committed reversible error in treating such payment as tolling the statute?

And if the latter is true, what legally authority do you intend to submit on the appeal in support of such an argument? That is, that only payments expressly specified by the terms of the note can result in tolling the running of the statute?

 

[Zigner]

I'm going to assume that the note is governed by the laws of Delaware and that the court applied Delaware's 6-year statute of limitations.

With that in mind is it your position that no payments whatsoever were made upon the note prior to the expiration of the statute?

OR are you admitting that a partial payment was made prior to the expiration date, but that the payment didn't "meet the terms of the note" and therefore the judge committed reversible error in treating such payment as tolling the statute?

And if the latter is true, what legally authority do you intend to submit on the appeal in support of such an argument? That is, that only payments expressly specified by the terms of the note can result in tolling the running of the statute?

lat - the note states that payments should be an "average of $250 per month" and then tells what the consequences will be if the payments fall below that amount. In other words, the documents actually allows for payments of ANY amount, thus any payment "met the terms of the note".

ETA: I do see your point that the OP is mistaken in his belief about what can toll the statute.

 

[adjusterjack]

He took me to court in Delaware and I argued that the statue of limitations had been exceeded and he had no case for the debt. The judge was only concerned with the fact that I made a payment (even though it never met the terms of the loan) and awarded judgment to him. I have since appealed and was wondering what defense I have. It was over 6 years when he filed the complaint from when the “cause of action” or breach of contract occurred. What defense do I have to get judgement from the court and hold him to what he verbally told me?

Holding your stepfather to what he "verbally told" you about not having to repay the debt is not the issue. Had you been able to prove that he forgave the debt you wouldn't have a problem.

It's the statute of limitations that is the problem.

Had you simply defaulted on the debt and he filed after the 6 year limit you would have had a defense and likely would have won.

However, if it is the case that you made payments after the 6 year limit was up, your post implies that the judge ruled that the statute of limitations restarted when you made additional payments and the suit was thus not time barred.

If that's what happened then I think (my two cents worth) the judge erred.

2016 Delaware Code
Title 10 - Courts and Judicial Procedures
CHAPTER 81. PERSONAL ACTIONS
§ 8109. Bills and notes.
Universal Citation: 10 DE Code § 8109 (2016)
When a cause of action arises from a promissory note, bill of exchange, or an acknowledgment under the hand of the party of a subsisting demand, the action may be commenced at any time within 6 years from the accruing of such cause of action.

https://law.justia.com/codes/delaware/2016/title-10/chapter-81/section-8109/

The part that I emphasized is a bit cryptic but I think it means that you would have had to have put something in writing acknowledging the debt for the SOL to restart.

Did you?

If you didn't, then the judge should have addressed the SOL and not the payment.

I've done a search for case law and found about a dozen that address Section 8109 but nothing that addresses whether a payment or a writing restarts the SOL.

That doesn't mean that there might not be any but now it's up to you to find at least one for Delaware that you can cite in your appeal.

 

[HRZ]

I'm under the lay impression that the act of making some actual payment on the debt is an acknowledgement of the debt ..and resets the time clock to the new event ...but that was from B school not law school side of street.

 

[latigo]

Back in 2011 I entered into a promissory note agreement with my stepfather as he gave me a loan to cover lawyer fees. The note stated that the money would be paid back at an “average” of $250 a month until the loan was paid off and if it ever fell below that average 5% interest would be added to the balance. I made several payments that year and shortly after advising him to invest into a company of which he made a ton of money he verbally told me to not worry about the debt anymore because “my advice had made him plenty to cover my debt.” A few years later he started to bug me about starting to pay again which was surprising and being stupid about it and in constant fights, I started giving him a partial payment each month. He became greedy and started to say he needed more than the agreed upon amount and at that point I just stopped paying him anything. He took me to court in Delaware and I argued that the statue of limitations had been exceeded and he had no case for the debt. The judge was only concerned with the fact that I made a payment (even though it never met the terms of the loan) and awarded judgment to him. I have since appealed and was wondering what defense I have. It was over 6 years when he filed the complaint from when the “cause of action” or breach of contract occurred. What defense do I have to get judgement from the court and hold him to what he verbally told me?

You ask what "defense you have to get judgement from the court and hold him to what he verbally told you? (That is, that the stepfather supposedly verbally agreed or promised to forgive the debt.)

So let me ask you this:

In your answer to your stepfather's complaint did you by chance plead the affirmative defense of "promissory estoppel"? (Which is the only means of introducing the issue as a defensive measure.)

And if so, what evidence did you submit to the court to show that you relied on the verbal promise to your detriment and that it would be patently inequitable and unjust for the plaintiff to subsequently be allowed to enforce the note?

In other words, how did you attempt to prove, if any, that your circumstances worsened as the sole and direct result of having relied on the plaintiff's verbal promise to excuse or forgo the debt?

And here let me note that I don't see how you could prove that you relied on any such "verbal promise" when by your own admission you subsequently made additional payments towards the note. And reliance by the promisee being a critical element of the defense of promissory estoppel the defense would have failed in this instance. So the answer is that you are not going to get the judgment reversed on this issue.

______________

Also, let me explain something's about your appeal. If you are appealing from a court of record, i. e., the appeal is not to be heard de novo, then you cannot produce new evidence or raise defenses that were not presented at the trial level.

Secondly, if not de novo, the appellate court is not going to retry the lawsuit nor entertain evidence, testimony, etc.

Plus, all it needs to sustain the lower court's ruling is to find some substantial evidence in the trial record - not necessarily the prevailing or most compelling or convincing evidence - but just some recognizable evidence supporting its decision.

 

[adjusterjack]

I'm under the lay impression that the act of making some actual payment on the debt is an acknowledgement of the debt ..and resets the time clock to the new event

Not necessarily. It's not universal.

Florida, for example, requires a written acknowledgment:

95.04 Promise to pay barred debt.—An acknowledgment of, or promise to pay, a debt barred by a statute of limitations must be in writing and signed by the person sought to be charged.

And Texas:

Sec. 16.065. ACKNOWLEDGMENT OF CLAIM. An acknowledgment of the justness of a claim that appears to be barred by limitations is not admissible in evidence to defeat the law of limitations if made after the time that the claim is due unless the acknowledgment is in writing and is signed by the party to be charged.

In fact, the following chart reveals that virtually all states require written acknowledgment:

https://www.avoidbk.com/acknowledgement-debt-statute-limitations/

 

[HRZ]

My brain freeze...I took it in context that he paid something late but before sol expired ...I thought that reset the time clock to most recent event ..

Apparently the sol ran 6 years. after last payment ...and later he paid something w/o other written signed acknowledgement of debt ...I stand corrected , thanks

 

[Taxing Matters]

The part that I emphasized is a bit cryptic but I think it means that you would have had to have put something in writing acknowledging the debt for the SOL to restart.

Ah, Jack, that phrase is an ancient legal phrase that, as used in this statute, does not mean what you think it does. This is not about restarting a SOL. It is about determining the SOL that applies to the debt. The phrase you highlighted refers to a written acknowledgement of a previously unwritten debt. That written acknowledgement essentially converts to a written debt instrument akin a promissory note and thus the six year statute of limitations would apply. You must still, however, determine when the cause of action accrued to determine when the six years starts to run. If the debt involved was a loan, then that's generally going to be when a required payment was not made, thus breaching the agreement. But getting this acknowledgement does nothing to restart an expired SOL. You have to look elsewhere in Delaware law for that.

 

[Dassault5209]

I thank you all for your answers. The note only mentioned two months for the after as an example stating (I.e. $400 one month $100 the next) to carry the average. We do have a receipt of payment form that shows the average was maintained the first few months of the note then dropped off with pavements resuming years later. I am contesting when the “cause of action” occurred which To be is when that average dropped below the 500 for the first time going against terms. The payments Year’s later to me never brought the average monthly payment within the terms of the note proving when the cause of action happening. I am not arguing his verbal forgiveness of the debt because I have nothing to prove it. I am solely focused on the SOL and proving he was outside the 6 years when he filed his complaint.

 

[Dassault5209]

I'm going to assume that the note is governed by the laws of Delaware and that the court applied Delaware's 6-year statute of limitations.

With that in mind is it your position that no payments whatsoever were made upon the note prior to the expiration of the statute?

OR are you admitting that a partial payment was made prior to the expiration date, but that the payment didn't "meet the terms of the note" and therefore the judge committed reversible error in treating such payment as tolling the statute?

And if the latter is true, what legally authority do you intend to submit on the appeal in support of such an argument? That is, that only payments expressly specified by the terms of the note can result in tolling the running of the statute?

Admitting partial payment was made prior to the expiration date and that it never met or maintained the terms of the note. I have a receipt form we would both sign and state the amount of payment. Proves that months after we entered into the note the average payment was not maintained and that payments resumed years later. The note stated if the payments fell below an average amount that an interest penalty would be applied. That to me is a cause of action starting the SOL and supporting my case for when it began.

 

[adjusterjack]

The SOL starts running when you are in default.

I started giving him a partial payment each month. He became greedy and started to say he needed more than the agreed upon amount and at that point I just stopped paying him anything.

What was the exact date of your last partial payment?

What was the exact date that the lawsuit was filed with the court?

 

[adjusterjack]

Ah, Jack, that phrase is an ancient legal phrase that, as used in this statute, does not mean what you think it does.

I'm old but not ancient enough.

 

[Dassault5209]

The SOL starts running when you are in default.



What was the exact date of your last partial payment?

What was the exact date that the lawsuit was filed with the court?

There were 7 total payments. The first 4 neglect to say the year, just day and month. The last 3 say the full date. They read as if they reflect the same year. 4/6, 4/20, 5/10, 6/3, 7/12/15, 8/15/15, and 9/21/15. To me it can be interpreted that all the payments were received in 2015 because of how it shows on the paper. Nothing on his end to prove otherwise as all payments were made in cash. Without proof, to me it leaves doubt about what year the first payments were made although they were made in 2011. Note was signed April 2011 and he filed the complaint in July of 2017.

 

[adjusterjack]

When you started making payments doesn't count. It's when you stopped making payments that counts.

You were not in default as long as you made payments and the lender accepted them.

You defaulted in 2015 and you were sued in 2017, well within the statute of limitations.

My guess: You will lose the appeal.