Most business and real estate attorneys assume that the statute of limitations on an oral contract is two years, and on a written contract is 4 years. These are boilerplate assumptions that can trap a businessperson or a landlord; they do not always hold true once we delve into the specifics of a case.
We recently represented a borrower in a foreclosure action brought by the lender bank where no payments had been made on the loan for over 4 years, without any remedial or collection action initiated by the lender. The loan had been bundled, sold and assigned several times and with no lender follow up for some unknown reason. The assumption on the part of the borrower was that passing the four-year mark changed the nature of the dispute. So we took a closer look to confirm whether the statute of limitations could serve as a possible defense. We found that not to be the case. The limitations period on a promissory note is 6 years rather than 4:
Pursuant to California Commercial Code Section 3118(a),
an action to enforce an obligation of a party to pay a note payable at a definite time must be commenced within 6 years after the due date or dates stated in the note or, if a due date is accelerated, within 6 years after the accelerated due date.
This is another example of the trap waiting for both experienced and new attorneys faced with a statute of limitations issue, which can often be more complicated than realized at first glance. And this trap is contained not only in the California Code of Civil Procedure but in other statutes as well.
This loan was a leftover from the days of the Great Recession when loans were bundled, sold and assigned to unsuspecting investors without proper due diligence by the investors and rating agencies, and were serviced by loan servicers with less than diligent follow up. We find it incredible that we continue to see cases involving these types of loans 11 years after the Great Recession hit in 2008.
While it may be tempting to create informal agreements about business or real estate transactions with family members, in our experience the minor discomfort of formalizing agreements between family members up front pales in comparison to the damage a souring business deal can do to families who operated “on a handshake” instead of signing legally binding written contracts. Continue reading →
Note to readers: This brief post covers only one key aspect of this important case. There are other ramifications for contractual relationships that could impact you. Check with us for more details if you have an interest, or any concerns.
In the recent court case of California Bank & Trust v. Del Ponti, the court set an important precedent that applies to disputes on commercial loans between property developers and lenders. In effect, a commercial lender cannot enforce waivers in guarantee agreements which are unlawful or otherwise contravene public policy. Guarantor waivers are limited to certain legal and statutory defenses specifically set forth in the agreements, but not equitable defenses. Continue reading →
Foreclosing lenders in secured transactions who intend to make a claim under an insurance policy for pre-foreclosure damage should be wary of making a full credit bid at the foreclosure sale. Continue reading →
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PLP recently represented a large financial institution in a commercial collections matter in Alameda County. We successfully obtained expedited orders for Writs of Attachment on the debtor’s commercial and residential properties, and immediately recovered substantial Continue reading →