United States District Court, District of New Jersey
August 13, 1999
ANN MOTLEY, PLAINTIFF,
THOMAS MOTLEY, DEFENDANT.
The opinion of the court was delivered by: Irenas, District Judge.
Before this court is defendant Thomas Motley's ("defendant")
motion for summary judgment pursuant to Federal Rule of Civil
Procedure 56(c). Defendant alleges that summary judgement is
appropriate because plaintiff Ann Motley's ("plaintiff") claim is
barred by the statute of limitations as set fourth in N.J.S.A.
12A:3-122 which requires that an action be commenced within six
years after a note is negotiated.
The plaintiff disagrees and argues that summary judgment is
inappropriate because the limitations period of N.J.S.A.
12A:3-118 controls and requires that a case be commended within
six years after making a demand or within ten years from the date
upon which no payments of principle or interest have been made.
Plaintiff argues that this case was filed within this statute's
period of limitations. Because this Court finds that N.J.S.A.
12A:3-118 controls, the motion for summary judgment is denied.
The instant action for payment of two promissory notes arises
from the following simple and undisputed facts. On April 5, 1991,
Thomas Motley executed a promissory note ("Note I") in favor of
Ann Motley in the amount of $50,000.00 as consideration for the
payment of the sum of $50,000.00. Subsequently, on September 3,
1991, Thomas Motley executed a second promissory note ("Note II")
in favor of plaintiff in the amount of $30,000.00 as
consideration for the payment of the sum of $30,000.00. The
parties do not dispute that Note I and Note II (collectively
referred to as "Notes") are both demand notes.
On July 28, 1997, plaintiff filed an action in Superior Court
of New Jersey, Cape May County for payment of the Notes. The
complaint however was dismissed on November 21, 1997, because
defendant was not subject to the jurisdiction of the Superior
Court of New Jersey.
The present action, pleading jurisdiction based on diversity of
citizenship, was commenced by plaintiff on August 7, 1998, for
payment of the Notes executed by defendant. On July 8, 1999,
defendant filed the motion for summary judgement pursuant to
Federal Rule of Civil Procedure 56(c).
Under Fed.R.Civ.P. 56(c), a court may grant summary judgment
"if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
The non-moving party may not simply rest on its pleadings to
oppose a summary judgment motion but must affirmatively come
forward with admissible evidence establishing a genuine issue of
fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106
S.Ct. 2548, 91 L.Ed.2d 265 (1986).
In deciding a motion for summary judgment, the Court must
construe the facts and inferences in a light most favorable to
the non-moving party. Pollock v. American Tel. & Tel. Long
Lines, 794 F.2d 860, 864 (3d Cir. 1986). The role of the court
is not "to weigh the evidence and determine the truth of the
matter, but to determine whether there is a genuine issue for
trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106
S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The substantive law governing the dispute will determine which
facts are material, and only disputes over those facts "that
might affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment." Id. at 248,
106 S.Ct. 2505. Where the moving party has carried its initial
burden of demonstrating the absence of a genuine issue of
material fact, "its opponent must do more than simply show that
there is some metaphysical doubt as to the material facts."
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
A genuine issue for trial does not exist "unless the party
opposing the motion can adduce evidence which, when considered in
light of that party's burden of proof at trial, could be the
basis for a jury finding in that party's favor." J.E. Mamiye &
Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3d Cir. 1987)
(Becker, J., concurring)
The present motion requires this Court to consider the effect
of an amendment to the statute of limitation on a claim for a
demand note which note was negotiated prior to passage of the
statutory amendment. The defendant argues that the statute of
limitation in effect at the time the note was negotiated controls
and bars the application of the amended statute of limitation.
The plaintiff argues that the amended statute affected a repeal
of the earlier statute and, therefore, the amended statute of
limitation applies to a claim filed after the amendment's
effective date. Because this Court agrees with the defendant, the
motion for summary judgment is denied.
N.J.S.A. 12A:3-118 which was made effective in June of 1995
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.
Prior to this 1995 amendment, the question of the statute of
limitation on a demand note was controlled by N.J.S.A. 12A:3-122
which provided that the statute of limitations for a demand note
began to run when the note was issued.
Essentially this Court must determine if defendant correctly
argues that the statute of limitations drafted in N.J.S.A.
12A:3-122 applies to the present action and bars recovery since
it was in effect at the time the demand note was negotiated. To
support this argument, the defendant relies on cases from several
other jurisdictions which have dealt with similar amendments.
See S & S Diversified Servs., L.L.C. v. Arguello, 911 F. Supp. 498,
501 (D.Wyo. 1995) (holding without discussion that revised
U.C.C. § 3-118 would not be applied retroactively to bar a
claim); Hill v. Mayall,
886 P.2d 1188 (Wyo. 1994) (same); Johnson v. Hodge,
223 Ga. App. 227, 477 S.E.2d 385 (1996) (holding that the revised section
3-118 would not be applied to a claim filed when the prior
statute of limitations was still in effect).
None of the cases cited by the defendants support the
application of 12A:3-122 to this case. The first two cases relied
on by the defendant, S & S and Hill, deal with a court's
refusal to apply a shorter statute of limitations when the
parties relied on the greater statute in effect at the time of
the instrument's negotiation. This Court does not disagree with
these decisions. That the application of a shorter statute of
limitations to reduce the vested rights of a party may violate
notions of due process involves a different analysis. This Court
in unconvinced that the same violation occurs when a statute of
limitations is increased.
It is true that New Jersey protects vested contractual rights
from legislative and judicial amendment. See Holmes v. Russ,
113 N.J. Super. 445, 447, 274 A.2d 75 (Law Div. 1971) ("It has
always been held that when a right of action has become barred
under existing laws, the right to rely upon the statutory defense
is a vested right . . . Once the right to rely upon the statutory
defense becomes vested it cannot be rescinded or disturbed by
subsequent legislation"). However, "there is no vested right in
`the continued existence of a statute or rule of the common law
which precludes its change or repeal.'" D.J.L. v. Armour Pharm.
Co., 307 N.J. Super. 61, 83, 704 A.2d 104 (Law Div. 1997),
(quoting Phillips v. Curiale, 128 N.J. 608, 620, 608 A.2d 895
In D.J.L., the court explained the difference between a
vested right and an expectation:
An "expectation," or a mere "hope", even when
reasonably based upon present law, is not a vested
right. Until there is a "final disposition of the
litigation . . . new statutory provisions can
constitutionally be applied . . ." A right cannot be
regarded as vested unless it is something more than a
"mere expectation . . . based upon an anticipated
continuance of the present laws." To be fully vested,
there must be "a title, legal or equitable, to the
present or future enjoyment of property, or to the
present or future enforcement of a demand, or legal
exemption from a demand made by another." "Litigation
expectations are never final."
In the case at bar the statute of limitations had not vested
prior to the passage of N.J.S.A. 12A:3-118 in 1995. Under section
122, the statute would not have expired until 1997, six years
after its negotiation. Therefore, when section 118 was passed the
defendant did not have a vested statute of limitations defense.
The third case relied on by the defendant is also not apposite.
In Johnson v. Hodge, the Court of Appeals of Georgia decided
not to retroactively apply revised U.C.C. § 3-188. This section
had been revised after the plaintiffs had filed suit and at
which time the defendant had a vested statute of limitations
defense. Application of the earlier statute of limitations would
have barred the action. Application of the new statute, however,
would have divested the defendant's of this defense. Because the
statute did not call for retroactive application, the Court
declined to apply it in such a manner. See Johnson, 477 S.E.2d
The same Court of Appeals of Georgia distinguished Johnson
from a case with facts identical to the case at bar. In McNeal
Construction Co. v. Wilson, 235 Ga. App. 759, 509 S.E.2d 742, 743
(1998), the Court held that it was unnecessary to reach the issue
of retroactive application as reached in Johnson. While the
note in question was negotiated prior to the passage of the new
statute of limitations, the case was filed in the Georgia Court
after the effective date of the passage of the amended statute
of limitations. For this reason the Georgia Court held that
Johnson was not applicable and the new statute
of limitations was being prospectively applied.
Several other courts have reached the same result. See, e.g.,
First Commerce of America v. Mr. Travel Agent, Inc., Civ. A. No.
940136815, 1995 WL 155424 (Conn. Sup.er.Mar.29, 1995); Lenders
Collection Corp. v. Harris, 900 P.2d 1022 (Okla.App. 1995);
Wetmore v. Brennan, 378 So.2d 79 (Fla. 3d DCA 1979); but see
Samples-Ehrlich v. Simon, 876 P.2d 108 (Colo.App. 1994)
(applying statute of limitations in effect at the time of the
contract negotiation because repealing statute called for this
In First Commerce, the Connecticut Superior Court was faced
with a statute of limitations defense identical to the one at
bar. The plaintiff had attempted to collect on a note negotiated
in 1984 on which payment was not demanded until 1993. When the
note was negotiated, Connecticut applied a six year statute of
limitations which began to run on the date the note was issued.
See General Statutes § 42a-3-122(1). In 1991, the Connecticut
legislature repealed § 42a-3-122(1) in favor of § 42a-3-118(b)
which provided that an action to enforce a demand must be
commenced within six years of the demand. As the suit was
commenced in 1994, after the effective date of the statute, the
Court applied § 118, the more beneficial statute of limitations.
In Samples-Ehrlich v. Simon, 876 P.2d 108 (Colo.App. 1994),
the Court was faced with facts similar to those at bar and
decided in favor of applying the statute of limitations in
existence at the time the note was negotiated. However, this case
is easily distinguished. In arriving at its decision, the Court
relied on the language of the repealing statute which
specifically and unequivocally stated that any case based upon a
note negotiated prior to the date of the new statute must comply
with the time limits applicable to the notes when negotiated.
See id. at 111. New Jersey's statute contains no such language.
Therefore, this case suggests that absent such clear intent to
maintain the prior statute of limitations for notes negotiated
prior to the new statute, the new statute controls causes of
action filed after the effective date of N.J.S.A. 12A:3-118.
This Court agrees with the other jurisdictions that have faced
claims with similar facts and similar repealing statutes. Since
the application of N.J.S.A. 12A:3-118 will not divest the
defendants of any vested rights and the case was filed after the
statute was amended, this Court will apply the statute of
limitations found in 12A:3-118. Accordingly, this Court finds
that the statute of limitations was not expired when the current
suit was filed.
For the reasons stated above, defendant's motion for summary
judgment is denied. An appropriate order will be issued on an
even date herewith.
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