ADMITTING A DEBT EXISTS CAN REVIVE A CLAIM BARRED BY THE STATUTE OF LIMITATIONS
You might know there are deadlines to file any type of civil litigation claim known as statutes of limitation. For example, in New York, a breach of contract claim must be filed within six years after the date of breach (e.g. if a breach occurred on January 1, 2013, plaintiff must commence an action by January 1, 2019). Typically, if a plaintiff does not start a lawsuit before the statute of limitations expires, the claim is barred. In other words, coast clear for the would-be defendant … or is it? Businesspeople should be careful in their communications with their counterparts because there are several ways in which an otherwise time-barred claim can be revived. This post will focus on a New York statute that allows an otherwise time-barred claim to be revived if a person (or her agent) admits the outstanding obligation in a signed writing.
New York General Obligation Law § 17-101 allows the statute of limitations to start over where the party to be charged (i.e. the would-be defendant) acknowledges in a signed writing the existence of a debt or other unperformed contract obligation. For the statute to revive a claim, the writing may not contain anything inconsistent with the party’s intention to pay or perform, such as a reservation of rights or conditioning repayment on a future event occurring. The writing need not be a formal letter – New York courts have enforced this statute to revive expired claims against unwary defendants who sent financial statements carrying a debt to the lender, listed the debt in a bankruptcy petition and entered into a stipulation partially settling a claim.
The First Department Appellate Division, covering appeals from Manhattan and the Bronx, recently held that sufficient correspondence from a borrower’s attorney can satisfy the statute. In Nelux Holdings Int’l, N.V. v. Dweck, 2018 N.Y. Slip Op. 02569 (1st Dep’t Apr. 17, 2018), a borrower in 1999 and 2000 borrowed $1,499,900 from the lender, giving back promissory notes requiring repayment by May 10, 2004. Defendant repaid $179,885, leaving a balance due of $1,320,015. In the normal course, plaintiff would have to sue by May 10, 2010 (six years after the repayment date). The lender did not file suit until July 22, 2015 and the borrower made a motion for summary judgment to dismiss the case as time-barred. The lender relied on emails and letters sent by the borrower’s attorney in 2009 and 2012, claiming they satisfy the revival statute and restarted the statute of limitations. The correspondence described the promissory notes, the collateral and the interest rate, and stated that defendant “wishes to pay off and retire the secured loan” and “will be trying to retire the loan by the end of the year,” while also asking plaintiff to confirm the amounts outstanding. Defendant argued the writings were not signed by him and, thus, could not satisfy the statute and, in any event, the attorney did not represent defendant. The court denied the motion, holding (i) an acknowledgment of a debt signed by the party’s agent (an attorney in this case) can revive a time-barred claim; (ii) the writings acknowledged the debt and (iii) whether the attorney represented defendant is an issue for a jury to decide at trial.
If you have any questions about the timeliness of a potential claim, please do not hesitate to contact us.
