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Motley v. Motley

60 F. Supp.2d 380 (D. N.J. 1999)

LOANS; NOTES; STATUTE OF LIMITATIONS—A note executed before the applicable statute of limitations period was extended is governed by the longer statute of limitations.

On April 5, 1991, a demand note was executed in favor of a lender and on September 3, 1991, a second note was executed in favor of the same lender. On July 28, 1997, the lender sued in state court for payment of the notes but the complaint was dismissed on November 21, 1997 because the borrower was not subject to the jurisdiction of the state court. On August 7, 1998, the lender sued in federal court. Because of the length of time between the dates of execution of the notes and the commencement of the federal court suit, the district court had to consider the effect of an amendment to the New Jersey statute of limitations with respect to a note that was negotiated prior to the passage of that amendment. The borrower argued that the controlling statue of limitations was the one in effect at the time the note was negotiated. In June, 1995, New Jersey’s statute of limitations for such matters was amended to read: “[i]f demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six years after the demand. If no demand is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of ten years.” Here, no demand had been made. Prior to this amendment, the statute of limitations provided that suit must be filed within six years after the issuance of the note. The borrower cited cases where courts applied a pre-amendment statute of limitations, but the Court distinguished them because in each instance the amended statute of limitations sought to reduce the vested rights of a party, which implicated notions of due process. Here, the Court was unconvinced that the same violation occurs when a statute of limitations is increased. Even though New Jersey protects vested contractual rights from legislative and judicial amendment, “there is no vested right in ‘the continued existence of a statute or rule of the common law which precludes its change or repeal.’” The distinction is between a vested right and an expectation. Here, the statute of limitations had not vested prior to passage of the amendment. Therefore, when the statute was amended, the borrower did not have a vested statute of limitations defense. The Court then reviewed similar cases throughout the country but found that the New Jersey statute differed in material respects from many other states’ statutes, most importantly, in not making its change prospective only. Absent a clear intent to maintain the prior statute of limitations for notes negotiated prior to the new statute, the new statute was held to control causes of action filed after its effective date.


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