STATUTE OF LIMITATIONS ON PROMISSORY NOTES , INCLUDING MORTGAGE NOTES

In Connecticut, the statute of limitations for Promissory Notes can be

found in Connecticut General Statutes 42a-3-118. Also,   the statute

applies to Promissory Notes associated with mortgages.

 

Connecticut General Statutes 42a-3-118 Statute of limitations

(a) Except as provided in subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date

(b) Except as provided in subsection (d) or (e), if 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 for payment 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

(c) Except as provided in subsection (d), an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three years after dishonor of the draft or ten years after the date of the draft, whichever period expires first.

(d) An action to enforce the obligation of the acceptor of a certified check or the issuer of a tellers check, cashiers check, or travelers check must be commenced within three years after demand for payment is made to the acceptor or issuer, as the case may be.

(e) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within six years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the six-year period begins when a demand for payment is in effect and the due date has passed.

(f) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced (i) within six years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time, or (ii) within six years after the date of the acceptance if the obligation of the acceptor is payable on demand.

(g) Unless governed by other law regarding claims for indemnity or contribution, an action (i) for conversion of an instrument, for money had and received, or like action based on conversion, (ii) for breach of warranty, or (iii) to enforce an obligation, duty, or right arising under this article and not governed by this section must be commenced within three years after the cause of action accrues.

 

 

The major case in this area is Fleet National Bank v. Lahm. 86 Conn. App

545 (2004).

In Fleet National Bank v. Lahm

The note provided that in the event an installment payment is not made

when due, “the entire indebtedness with accrued interest due thereon

under this Note, shall, at the  option of lender, accelerate and become due

and payable without demand or notice of any kind.” Emphasis added.

 

The note in this case was not payable at the will of the plaintiff, but,

rather, at the option of the plaintiff only if an installment payment was not

made when due and the plaintiff exercised  its option to demand

payment.  (Therefore the note was not a demand note). Emphasis Added.

 

CGS 42a-3-118(a) applies because the note was payable at a definite time

rather than on demand. Although a debtor may be in default on one

installment, other installments lie in the future. “The fact that a cause of

action may have accrued with respect to an installment in

default does not necessarily mean that a cause of action has also accrued

against future installments that are not even due.” Id. When acceleration

of the total unpaid debt is optional on the part of the holder of a note, and

the holder has given no indication to the debtor that the entire balance is

presently due, the cause of action does not accrue until that balance is due

pursuant to the particular note or the holder has notified the debtor of an

earlier date

 

 

The result of Fleet National Bank v Lahm can be summarized as follows

  1. If there is a Promissory Note which provides for installment payments over a period of years, and the Note provides for an option to accelerate, the statute of limitations does not start until the end of the term of the Note, or acceleration by the Note Holder, whichever occurs first.

Example:  20 year promissory Note – Signed on 1/1/2006, with final

payment on 12/1/2025.

Assuming there is an option to accelerate, and any defaults

  • If no acceleration by Note Holder, the statute of limitations doesn’t start until the due date of 12/1/2025.  See CGS 421-3-118
  • If there is acceleration, the statute of limitations starts on the date of acceleration.

 

 

Connecticut General Statutes 42a-3-118(b) applies to demand notes.

General Statutes 42a-3-108(a) provides: “A promise or order is `payable on demand’ if it  states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or …. does not state any time of payment.”

For demand notes, the statute of limitations is as follows:

  • If there is a demand for payment, 6 years from the date of demand.  CGS 42a-3-118(b)
  • If there is no demand for payment, 10 years from the date neither principal nor interest has been paid. Id

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Robert M. Singer, Attorney at Law

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

 Serving all of Connecticut

 

3 thoughts on “STATUTE OF LIMITATIONS ON PROMISSORY NOTES , INCLUDING MORTGAGE NOTES”

  1. I get the statute of limitations for an accelerated note is 6 years from the date of acceleration if no further payments are made. But I think case law, mistakenly I believe, says that a bank can still foreclose on the mortgage even if the SOL on the note expired. Is this your belief? I have that case exactly. Foreclosure case brought after borrower declared bankruptcy. Case was dismissed for lack of prosecution. Then a second foreclosure case was brought but after the SOL expired. So, it seems that in the second case since the note is not enforceable (SOL expired) and the debt has been discharged in bankruptcy it should be a summary judgment in favor of borrower?

    1. The foreclosing creditor must be entitled to enforce the obligation that the mortgage secured in order to execute a foreclosure action. Given the SOL ran on the underlying debt the creditor is not entitled to foreclosure. The mortgage follows the note – both are worthless. The unenforceable note is worthless and should act to extinguish the recorded lien.

      1. Not in Connecticut. The period to enforce a Mortgage is different than the time frame to enforce a Promissory Note. In Connecticut, there will be many situations in which a creditor will be unable to enforce a Note because of the Statute of Limitations, but the mortgage can still be foreclosed.

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