The “Installment Contract” Approach to the Statute of Limitations

In re Estate of Balk, 445 N.J. Super. 395 (App. Div. 2016).  Mark Roseman was the executor of a decedent’s estate.  The decedent’s two sons sued Roseman for breach of fiduciary duty in connection with his activities regarding the estate.  In 2007, Roseman and the sons reached a settlement agreement, under which Roseman signed a promissory note for $800,000 to resolve all claims.  The first payment under that note, of $10,000, was to be made within sixty days of signing the settlement agreement.  Succeeding payments, in differing amounts, were to be made in December 2007, June 2008, and December 2008, with the final payment, to cover the remaining balance, to be made within 24 months of the signing of the settlement agreement.

Roseman did not make any of the required payments in full.  He did, however, pay a total of $37,407 between August 2007 and January 2009.

On June 2, 2014, one of the sons filed a motion to enforce the settlement agreement.  In response, Roseman argued that the application was time-barred.  Though New Jersey affords six years to file a suit on a contract claim, Pennsylvania law, which Roseman said should apply because (among other things) both he and the son who sued lived in Pennsylvania, has a four-year statute of limitations.  The Chancery Division disagreed with Roseman, finding that New Jersey had substantial interests in applying New Jersey law and that any interest of Pennsylvania did not outweigh that of New Jersey.  The Chancery Division also ruled that since these were installment payments, a new right to sue arose each time that an installment payment was not made.

Roseman appealed, but the Appellate Division affirmed.  Writing for the panel, Judge Currier observed that a settlement agreement is subject to the same principles of interpretation as any other contract, and that de novo review applied.  She explained in detail the “installment contract approach” that the Chancery Division had adopted.  In summary, “a new statute of limitations begins to run against each installment as that installment falls due and a new cause of action arises from the date each payment is missed.  Unless there is a repudiation, a plaintiff may sue for each breach only as it occurs.”

Here, there was no repudiation, which “entails a statement or voluntary affirmative act indicating that the promisor will commit a breach when performance becomes due.  Roseman never said anything or took any action to repudiate his obligations.  On the contrary, he did make some payment.

Judge Currier concluded that “a missed payment is insufficient to constitute a total breach of an installment contract or agreement unless accompanied by anticipatory repudiation indicating a failure to perform future obligations specified in the contract.”  She cited cases from other jurisdictions that agreed that “a breach of an installment contract by non-payment does not constitute a breach of the entire contract.”  The case was remanded, with instructions that “[t]he Estate is entitled to all payments which were due from the six years prior to the motion’s filing date of June 2, 2014.”