Utah Court of Appeals
Do partial payments made by third parties toll the statute of limitations on promissory notes? Dale K. Barker Company PC CPA Profit Sharing Plan v. Turner Explained
Summary
Turner borrowed $25,000 from the Plan under a promissory note due in sixty days but failed to make timely payment. In 2015 and 2017, Turner directed that his attorney fees from collection cases be applied to reduce the debt. The Plan sued in 2018, and Turner argued the suit was barred by the six-year statute of limitations.
Practice Areas & Topics
Analysis
In Dale K. Barker Company PC CPA Profit Sharing Plan v. Turner, the Utah Court of Appeals addressed whether partial payments made by third parties can toll the statute of limitations on promissory notes when made at the debtor’s direction.
Background and Facts
Turner borrowed $25,000 from the Plan under a promissory note due within sixty days in July 2010. He failed to make any payments when due. However, in February 2015 and November 2017, Turner directed that his attorney fees from collection cases be applied toward the outstanding debt, resulting in payments of approximately $40,000 and $2,500 respectively. The Plan sued in 2018 to recover the remaining balance, and Turner moved for summary judgment arguing the six-year statute of limitations had expired.
Key Legal Issues
The primary issue was whether Utah Code section 78B-2-113(1), which tolls the statute of limitations when “a payment is made on the debt by the debtor,” applies to payments made by third parties at the debtor’s direction. Turner argued that only direct payments by the debtor could restart the limitations period.
Court’s Analysis and Holding
The court rejected Turner’s formalistic argument, applying the precedent from Holloway v. Wetzel that focuses on whether the payment evidences the debtor’s acknowledgment and willingness to pay the debt. The court found that Turner’s February 2015 emails directing application of his attorney fees to the debt clearly demonstrated his acknowledgment of the obligation. The court also noted that Utah’s general tolling statute supplements the UCC provisions governing promissory notes under Utah Code section 70A-1a-103.
Practice Implications
This decision clarifies that partial payments need not be made directly by the debtor to toll the statute of limitations, provided they are made at the debtor’s direction and evidence acknowledgment of the debt. Practitioners should carefully examine all payments and agreements when evaluating statute of limitations defenses in debt collection cases.
Case Details
Case Name
Dale K. Barker Company PC CPA Profit Sharing Plan v. Turner
Citation
2021 UT App 119
Court
Utah Court of Appeals
Case Number
No. 20200070-CA
Date Decided
November 4, 2021
Outcome
Affirmed
Holding
Partial payments made on a promissory note at the debtor’s direction toll the statute of limitations under Utah Code section 78B-2-113(1), even when the payments are made by a third party pursuant to the debtor’s instructions.
Standard of Review
Questions of law including statute of limitations, contract interpretation, and award of attorney fees reviewed for correctness; calculation of reasonable attorney fees reviewed for abuse of discretion but conclusions of law for correctness
Practice Tip
When advising clients about statute of limitations defenses, consider whether any partial payments—including those made indirectly through third parties at the debtor’s direction—may have restarted the limitations period.
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