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Santiago v. Villoresi

A-6083-05T2 (N.J. Super. App. Div. 2007) (Unpublished)

NOTES; GUARANTIES — Even if a debt is revived by a debtor, that revival alone is ineffective as to a guarantor and the statute of limitations against the guarantor is not tolled because a guarantor’s contract is separate from the guaranteed note.

A creditor lent $50,000. The debtor verbally agreed to repay in ten days with ten percent interest. Sometime later, the debtor’s daughters executed a guarantee of that debt. The debtor subsequently tendered two dishonored checks. Numerous attempts by the creditor to collect the debt were unsuccessful. Five years later, the debtor wrote to its creditor acknowledging the debt, otherwise payable on demand, but requested a short extension. The creditor responded that it would forebear for six months. Neither payments nor progress reports were forthcoming. Almost two years later, the debtor sent the creditor a holiday card writing that he would finally be able to repay because of good business fortune. Finally, approximately eighteen months after that, the creditor sued on the promissory note and the guaranty. The debtor moved for summary judgment, arguing that the six year statute of limitations governing contract claims had expired. The lower court denied the motion, finding that the debtor’s subsequent acknowledgments of the debt and promises to pay revived the debt and tolled the running of the statute of limitations. It granted relief as to the daughters, whose separate and independent obligation the court found was not similarly revived. The matter was tried against the debtor, and he was found liable for the original debt plus interest. The creditor appealed the dismissal of the action against the daughters, and the debtor appealed the finding against him, arguing that his actions created only a conditional debt which did not operate to commence the running of the statute of limitations anew.

The Appellate Division denied both appeals. It first affirmed that the six year statute of limitations, as applied to an existing contractual debt or obligation, could be tolled by an acknowledgment or a promise to pay, and agreed that the debtor’s acknowledgments and actions, with confirmation in writing, renewed the limitations period. The Court held that the correspondences by the debtor fairly supported an implication of a promise to pay the debt immediately or on demand. It disagreed that the debtor conditioned his promise to pay upon his financial recovery in his correspondence. The Court viewed the debtor’s letters as merely explaining his request for an extension of time to repay, rather than making good business fortune as a prerequisite to payment. Had it been a conditional debt, the debtor’s renewal promise would not have been revived by the statute of limitations. Lastly, the Court affirmed the lower court’s dismissal of the action against the daughters, finding that even if a debt is revived by a debtor, that revival alone is ineffective as to a guarantor and that the statute of limitations is not tolled because a guarantor’s contract is separate from the guaranteed note.


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