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Flynn v. Sevastakis

A-3263-04T2 (N.J. Super. App. Div. 2006) (Unpublished)

NOTES; STATUTE OF LIMITATIONS—The statute of limitations for a note that is payable on demand begins to run when the demand is made, but for a note that is “pay when able,” it begins to run when the borrower first became able to repay the loan.

A man and his then wife lent money to her sister and then brother-in-law. The brother-in-law used the money to purchase a boat for his new fishing business. No written promissory note was signed, but the man told his brother-in-law to pay it when he was able. About three years later, the man demanded repayment of the loan and the brother-in-law told him he was unable to pay it back. When the wife’s sister and brother-in-law divorced, the man again demanded payment under the assumption that the net proceeds from the sale of the marital home would be sufficient to repay the loan. The sister and brother-in-law did not repay the loan with the net sale proceeds. The man then sued for repayment. The lower court found that the note was a “payable on demand” obligation and not a “pay when able” note. Thus, the lower court had to determine when the six-year statute of limitations for filing the lawsuit began to run. If the loan was “payable on demand,” then the statute of limitations began to run when the initial demand was made years after the money was borrowed. If it were a “pay when able” obligation, the statue of limitations expired well before the law suit was filed. If the loan was a “pay when able” loan, then the statute of limitations began to run only when the brother-in-law had the financial ability to pay back the loan. If it were, the statute of limitations would have begun to run when the sister and brother-in-law sold their marital home in the divorce proceeding. In that case, the man’s lawsuit would have been timely. The lower court considered the testimony of the man’s now former wife in which she indicated that she told her then brother-in-law to pay it back when he was able. It also considered the various demands by the lender for repayment of the loan. The lower court then concluded that the loan was “payable on demand” and, since more than six years elapsed after the initial demand for repayment, the suit was untimely. The Appellate Division affirmed, finding that, based on the evidence presented, the lower court could have decided the matter either way. Therefore, there was no basis to disturb the lower court’s decision just because the evidence could also have supported the matter being decided in the lender’s favor.

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