Banco Do Brasil S.A. v. State of Antigua and Barbuda

Brief Fact Summary. A country entered into a loan agreement with a bank to borrow a certain sum of money.  The country refused to pay the bank back and after several years the bank sued and the country asserted a statute of limitations defense.

Synopsis of Rule of Law. A letter sent by the Defendant concerning a loan agreement after the Statute of Limitations has run "constitutes an acknowledgement or promise within the meaning of General Obligations Law §17-101" and as such is "sufficient to revive plaintiffs' time-barred claims."

Facts. On or about November 12, 1981, the Plaintiff, Banco Do Brasil (the "Plaintiff"), entered into a loan agreement with the Defendant, the State of Antigua and Barbuda (the "Defendant").  The Plaintiff agreed to loan the Defendant $3,000,000 plus interest.  The Defendant executed certain promissory notes providing for the repayment of the loan with interest.  The last payment was due on January 21, 1985.  The Ministry of Finance of the State of Antigua and Barbuda (the "Ministry") agreed to act as guarantor of the loan and promissory notes on behalf of the Defendant.  If the Defendant were to default, the Ministry would repay the loan.  The Defendant failed to pay the loan within the requisite time period.  On October 5, 1989, the Ministry wrote a letter to the Plaintiff confirming its obligation "to pay the amount due under the loan agreement", but recognized due to damages from Hurricane Hugo, needed to reschedule its payments.  On February 24, 1997, the Ministry wrote another letter re-confirming its obligation. Specifically, the Ministry laid out "the then-current balances (principal plus interest) due under the loan agreement".  Additionally, it "set forth the original amount, accrued interest, past-due interest and the total of $11,400,810.96 due and owing of that date."  The Defendant did not pay the amount due and owing under the loan agreement, and the Plaintiff commenced this action.

Issue. Does a letter sent by the Defendant concerning a loan agreement after the Statute of Limitations has run "constitute[] an acknowledgement or promise within the meaning of General Obligations Law §17-101" and as such is "sufficient to revive plaintiffs' time-barred claims."

Held. Yes.  The court first observed that the General Obligations Law §17-101 states in pertinent part:  "An acknowledgment or promise contained in a writing signed by the party to be charged thereby is the only competent evidence of a new or continuing contract whereby to take an action out of the operation of the provisions of limitations of time for commencing actions under the civil practice law and rules."  The court then quoted [Lew Morris Demolition Co. v. Board of Education of the City of New York] which while construing General Obligation Law§17-101 observed "[t]his section restates the rule that a written acknowledgment or promise will toll the Statute of Limitations … The writing, in order to constitute an acknowledgment, must recognize an existing debt and must contain nothing inconsistent with an intention on the part of the debtor to pay it."  The court concluded that the 1997 letter was "an acknowledgement or promise", which revived plaintiff's otherwise time-barred claims despite the fact it is arguably was "something less than a new promise to pay a past-due debt."  "In its entirety, such letter refers to the parties' 1981 loan agreement and then 'confirms' four 'balances,' namely, the original loan amount, accrued interest, past-due interest, and, adding up the first three balances, the 'total amount.' "

Discussion. This case offers an interesting discussion of General Obligations Law §17-101.