Promissory Note and Personal Guaranty Cases

Pepper Law, PLC has extensive experience handling promissory note cases and personal guaranty cases. While it might seem that the issues in promissory note cases and personal guaranty cases would be straightforward, that is often not the case. That is why it is important to retain a law firm like Pepper Law, PLC, which is experienced in handling the prosecution and defense of promissory note lawsuits and personal guaranty lawsuits, and which will evaluate all available defenses, strategies, and avenues for possible early resolution at the outset of the dispute.

There are potentially numerous defenses to a suit on a promissory note or on a personal guaranty. Whether we represent the lender, borrower or guarantor, we will evaluate all potential defenses at the outset so that they can be dealt with proactively, or, in a defense case, asserted effectively.

In Tennessee, a six year statute of limitations will apply to most promissory note cases and guaranty cases. (A ten year statute of limitations applies to demand notes.) The six year period begins to run from the date the promissory note or personal guaranty was breached. In many cases, that date is easy to determine because it will be the date that payment was due under the note or other instrument secured by the personal guaranty.

Many promissory notes provide for installment payments. In such cases, the six year statute of limitations period will begin to run each time a payment was due, but not made. Thus, in many cases involving promissory notes with installment payments, there will be multiple dates on which the statute of limitations began to run. Consequently, in cases involving promissory notes which require installment payments, a lender may be barred from collecting some payments, but not all payments.

If the promissory note requires installment payments, the statute of limitations as to future payments may have begun to accrue at a date even before any such payments were required to be made. Many promissory notes contain acceleration clauses which permit a lender to require the payment of all principal and accrued interest in the event of a breach of the note, so long as the lender provides notice of the acceleration to the borrower. A lender which has accelerated a note may well have triggered the running of the statute of limitations for all future installment payments.

Even in cases where it may seem clear that the lender’s claims are barred by the statute of limitations, the lender’s claims may not be barred. Under Tennessee law, a lender can, in some cases, defeat what would otherwise be a winning statute of limitations defense by using the doctrine of equitable estoppel. In multiple Tennessee cases, courts have prohibited the borrower from relying on the statute of limitations as a defense where the borrower engaged in conduct that induced the lender to delay in filing a lawsuit. Thus, understanding Tennessee law on equitable estoppel and knowing how to apply it can be critical in some cases.

Under Tennessee law, the payment of principal and interest, in some cases, can restart the running of the statute of limitations on the date of the payment.

In some cases, the statute of limitations may begin running on a promissory note even before the first payment was due. If a borrower anticipatorily repudiates his or her obligation before a payment is due, the statute of limitations may begin running on the date of the anticipatory repudiation.

Individuals who have signed personal guaranties may have defenses available to them in addition to the defenses available to the borrower. For those who have signed personal guaranties, it is important that a thorough evaluation of all available defenses be conducted at the outset of litigation.

Individuals who have executed personal guaranties may also have claims against other guarantors for contribution and indemnity, and the possibility of such claims should be analyzed thoroughly.

In addition to defenses to promissory notes and personal guaranties, a borrower may have counterclaims which can be asserted in the lawsuit against it. Such potential counterclaims include, but are not limited to, lender liability claims, fraud claims, negligent misrepresentation claims, and breach of contract claims. Pepper Law, PLC has extensive experience prosecuting and defending counterclaims in promissory note lawsuits and personal guarantee lawsuits.