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Izzo v. Izzo

A-2335-06T2 (N.J. Super. App. Div. 2008) (Unpublished)

NOTES; STATUE OF LIMITATION — In the absence of an acceleration provision in a note or agreement, each defaulted installment monthly payment constitutes a claim that would trigger a new statute of limitation.

A son entered into a stock purchase agreement with his retiring parents to purchase 90 of 100 total shares of the family’s business. The agreement provided for the son to make installment payments over a ten year period. In connection with the purchase, the son and his parents executed a stock pledge agreement that required the newly purchased stock to be held in escrow until the debt was fully paid. One year into the agreement, the son defaulted on payments. He alleged that his father told him, at the time, that he had forgiven the debt. Neither parent filed suit against the son during their lifetimes nor did they declare a default under the stock pledge agreement. The mother’s will noted the existence of the son’s obligation to her in connection with the family business purchase, and contained conditions for satisfaction of the debt. The son did not comply with those terms. Twelve years after entering into the agreement, the son sued his mother’s estate seeking a declaratory judgment that the six year statute of limitations barred enforcement of the debt. The mother’s estate filed suit against the son for breach of contract and breach of fiduciary duty in violation of the stock purchase and pledge agreements. The lower court found that the statute of limitations only barred any payments due prior to the initial six year statute tolling, leaving 138 payments due after that date as not time barred. A jury awarded judgment for those payments including prejudgment interest which was memorialized by court order.

The son appealed, arguing that the equitable doctrine of laches barred the claim and should have been applied by the lower court. The Appellate Division agreed with the lower court that no unexplainable and unexcusable delay contributed to the filing of the action to enforce rights as both parents refused to bring a suit against a loved one during their respective lifetimes. The Court also noted the alleged comment by the father that he would forgive the debt was hearsay, and that the son never discussed with anyone the alleged comment until well after his father died. The Court also agreed that, in the absence of an acceleration provision in a note or agreement, each defaulted installment monthly payment constituted a claim that would trigger a new statute of limitations. The Court found that the lower court properly found that only the oldest of the default payments owed were barred by the statute of limitations. It also held that prejudgment interest is awardable on contract claims and it is within the lower court’s discretion to choose the date from which prejudgment interest will begin to run.

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