Brief Fact Summary.
Zukerkorn (Defendant) owed two debts to First Hawaiian Bank (Plaintiff). Collection on these debts was barred by the statute of limitations. Plaintiff contended that Defendant made a new promise to pay the debts when he made partial payments on the debts.
Synopsis of Rule of Law.
When collection on a debt is barred by the statute of limitations, the debtor has not renewed the debt as a matter of law by acknowledging the debt or making partial payments when there remains a dispute over whether the debtor made a new promise to pay the debt.
Defendant borrowed $6,394 from Plaintiff on November 22, 1965 and then $2,500 on September 23, 1966. He made no payments on either loan. On August 6, 1973, Defendant obtained an automobile purchase loan from Plaintiff. He paid it off on April 6, 1976. Around December 11, 1975, Defendant applied for a credit card from Plaintiff. Plaintiff informed Defendant that he owed money on an “old account” and that the credit card would be issued only if Defendant promised to pay $100 a month on that old account. Defendant agreed and received the credit card. Defendant denied that Plaintiff ever informed him that the “old account” referred to the 1965 and 1966 loans or that he agreed to specifically repay those loans. Defendant also denied paying $200 in cash at the time of the agreement. Both parties do agree that after December 1975, Defendant made payments on the automobile loan and on his credit card and, pursuant to the disputed agreement, several small payments over three months in 1976. On March 3, 1978, Plaintiff sued Defendant on the 1965 and 1966 loans and on the balance due on his credit card account. The trial court entered summary judgment for Plaintiff on all three claims. Defendant appealed.
Does a debtor renew a stale debt as a matter of law when he acknowledges the debt and makes partial payments, but a dispute remains over whether the debtor made a new promise to pay the debt?
(Burns, J.) No. When collection on a debt is barred by the statute of limitations, the debtor has not renewed the debt, as a matter of law, by acknowledging the debt or making partial payments when there remains a dispute over whether the debtor made a new promise to pay the debt. Summary judgment on the credit card account is affirmed. As for the 1965 and 1966 loans, Defendant has shown that a genuine issue of material fact exists as to whether he did something to restart the statute of limitations. The law provides that a new promise by a debtor to pay a debt, whether collection on the old debt is barred by the statute of limitations at the time or not, binds the debtor for a new statute of limitations period. The new promise may be express or implied. If the promise is express, but conditional, it is not effective until the condition is met. The promise may be implied, either by express acknowledgment of the debt or partial payment of the debt. However, express acknowledgment or partial payment of the debt is only prima facie evidence of the implied promise and this presumption of a new promise may be rebutted by other evidence or by the circumstances under which they were made. Defendant denies acknowledging the 1965 and 1966 debts, agreeing to pay them, or paying them. He claims only that he agreed to pay, and did pay, a small amount on “an old account." Even if Defendant admitted acknowledging the old debts and paying on them, this evidence would only create a rebuttable presumption of an implied new promise to pay the old debts. Defendant must be permitted to rebut this presumption. The trial court erred when it found a new implied promise, as a matter of law, from these facts and granted summary judgment as to the stale debts. That determination must be made by the finder of fact at trial. Affirmed in part and reversed in part.
Restatement (Second) of Contracts, § 82 states:
1) A promise to pay all or part of an antecedent contractual or quasi-contractual indebtedness owed by the promisor is binding if the indebtedness is still enforceable or would be except for the effect of a statute of limitations.
2) The following facts operate as such a promise unless other facts indicate a different intention:
a) A voluntary acknowledgment to the obligee, admitting the present existence of the antecedent indebtedness; or
b) A voluntary transfer of money, a negotiable instrument, or other thing by the obligor to the obligee, made as interest on or part payment of or collateral security for the antecedent indebtedness; or
c) A statement to the obligee that the statute of limitations will not be pleaded as a defense.
The court’s holding in this case is similar, allowing a debtor the opportunity to rebut the presumption of a new implied promise to pay by showing other facts that may indicate a different intention.