jim10101 - SOL and partial payments
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Posted by lawguy
(216.30.212.58) on April 11, 2003 at 12:06:08:
Concerning your response below about tolling an SOL through a partial payment, I decided to post here becuase there will likely be some interest in this. Yes, MA requires that an acknowledgement or a new promise to pay be in writing. The specific statute requiring this is MGLA 260-13 and reads: "Acknowledgement or new promise, effect: No acknowledgment or promise shall be evidence of a new or continuing contract whereby to take an action of contract out of the operation of this chapter or to deprive a party of the benefit thereof, unless such acknowledgment or promise has been made by, or is contained in, a writing signed by the party chargeable thereby" But look at the very next statute, MGLA 260-14: "Part payment, effect: The preceding section shall not alter or impair the effect of a payment of principal or interest made by any person; but no endorsement or memorandum of any such payment, written or made upon a promissory note, bill of exchange or other writing by or on behalf of the party to whom such payment has been or purports to have been made, shall be sufficient proof of the payment to take the case out of the provisions of this chapter" What this all means is that a "promise to pay" must be in writing, as opposed to just an oral promise to pay. However, the old common law rule that an unqualified, voluntary partial payment implies a new promise to pay has been codified in Sec. 14. The only limitation here is that a part payment cannot be proved solely by an endorsement or memorandum of such payment. Proof of the actual payment is necessary, rather than a notation in the creditor's account book or the debtor's checkbook, or something to that effect. Looking at the annotated case citations to these statutes, it is clear that MA recognizes that a partial payment tolls the SOL and will revive an action already barred by the SOL: "By partial payment, a party may waive the six-year statute of limitations for contracts, even when it has run in its favor." LUMBERMAN MUT. CAS. CO. v. Y.C.N. TRANSP. CO. INC., 705 N.E.2d 297 (Mass.App. 1999) ******** I'll explain how this all works. The common law rule for most, if not all, states was that an acknowledgement of the debt or a new promise to pay a debt restarted the limitations period, even if the period had already run. An acknowledgment or new promise could be made either by writing or oral statement, or it could be implied by an unqualified, voluntary partial payment. A partial payment was interpreted by the courts to be an implied acknowledgment of the debt, and that paying on the debt implied in law a new promise to pay. (Who would pay money for a debt they did not believe was theirs? That was the logic behind it.) Most states have enacted statutes that require that an acknowledgment or new promise must be in writing. Most courts have interpreted such statutes to prohibit "oral" promises and acknowledgements. However, the courts have for the most part held that such statutes do not alter or effect the common law rule applying to partial payments. The reasoning being that because the statute only prohibits oral acknowledgements or promises, it does not apply to promises implied in law by virtue of an unqualified, voluntary partial payment. e.g. "Writing requirement for an "acknowledgment or promise" of a contractual debt which extends the statute of limitations does not apply to a partial payment on the debt." ABBOUD v. ABBOUD, 14 P.3d 569 (Ok.Civ.App.Div.1 2000) "Provision in limitation law that no verbal promise or acknowledgment shall be deemed sufficient evidence, in any case founded on a simple contract, to take case out of operation of the act or deprive party of benefits thereof deals with words, not acts, and making of part payment on an open account after bar of statute of limitations had fallen constituted an act and, therefore, was not subject to classification as written or oral, and, thus, statute was not applicable to such part payment." TAYLOR v. SLAYTON, 330 S.W.2d 280 (Ark. 1959) Some courts have held that these statutes that require a writing do alter the partial payment doctrine, such that a partial payment does not toll the SOL. However, these states are in the minority, and I believe there are only a handful of such states. The states that I know do not permit a partial payment to toll the SOL are Arizona, Georgia, Miss., and Iowa, and there may be more. I think that confusion has arisen because of the FCRA's reporting requirements. Under the FCRA, a partial payment will not reage the account for purposes of credit reporting; the debt must be made current before a new delinquency date can be used. Of course, this does not alter a state law regarding tolling the state SOL, but it could cause some confusion. I know this is a lot but I hope this clears some things up. Feel free to ask some questions about this.
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