Promissory Note Statute of Limitations: 4 or 6 Years?

  What is the statute of limitations on a promissory note? The statute of limitations for an action upon any contract, obligation or liability founded upon an instrument in writing is four years from breach per Code of Civil Procedure section 337. However, Commercial Code section 3118(a) provides a six-year statute of limitations for “an action to enforce the obligation of a party to pay a note payable at a definite time.” The period runs from “the due date or dates stated in the note.”

  “Note” is defined in Commercial Code section 3104, as an “instrument” or “negotiable instrument.” An “Instrument” means a negotiable instrument. If the instrument is a promise, it is a “note.” A “negotiable instrument” is an unconditional promise or order to pay a fixed amount of money (with or without interest or other charges) if it is: (1) payable to bearer or to order; (2) payable on demand or at a definite time; and, (3) does not state any other undertaking or instruction by the promisor to do any act in addition to the payment of money.

  When the choice is between two conflicting statutes there are two choices: the newer statute or the more specific statute. Section 337 dates back to 1872. It was last amended in 1961. Section 3118(a) was first enacted in 1992. Section 3118(a) is more specific. It defines “note” precisely, Section 337 applies generally to “any contract, obligation or liability founded upon an instrument in writing.” Section 3118(a) is both newer and more specific — it is the statute of limitations which governs an action on a promissory note that is also a negotiable instrument. If the promissory note is not a negotiable instrument, the shorter four-year statute of limitations is applicable. This does not end the story.

  When an instrument is payable in installments, the cause of action on each installment accrues on the day following the date the installment is due. Consequently, where money is payable in installments, the statute of limitations begins to run against the cause of action for the recovery of an unpaid installment at the time it is payable. Moreover, when a note contains an acceleration clause, the statute does not begin to run on installments not yet due until the creditor, by some affirmative act, manifests his election to declare the entire sum due.

  Therefore, a promissory note that calls for monthly interest payments only for two years and the balance, including the unpaid principal sum, at the expiration of two years, is not due until the principal sum is due at the end of the two-year period. Assuming the holder did not declare the principal amount due earlier than the end of the two-year period under the acceleration clause, the limitations period does not begin to run against the principal sum, until the principal sum becomes due at the end of the two year period.

  A wise note holder will institute an action on a promissory note within four years of the first missed payment to guarantee maximum recovery and remove any possible bar. However, a holder of a promissory note that is a negotiable instrument should feel confident pursuing recovery within six years of the last due date.

  Caveat: If the note is secured by a deed of trust or mortgage containing a power of sale, following the exercise of the power of sale via judicial foreclosure, the limitations period is shortened to three months after the date of sale.

  This summary illustrates the difficulty of determining when the statute of limitations has run on any particular promissory note because it will be determined by note’s exact terms and the conduct of the parties following breach. In view of this difficulty, the statute of limitations should always be pleaded as a defense to prevent waiver.


   Mr. Daymude consults with clients and accepts cases involving instruments in writing, including promissory notes. For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking a legal consultation or representation, call Michael Daymude at 818-971-9409.

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2 thoughts on “Promissory Note Statute of Limitations: 4 or 6 Years?

  1. California Code, Civil Code – CIV § 882.020 seems to say that the SOL is 10 years on secured (mortgage) debt? That is, in a case where the borrower simply stopped paying, and there was no foreclosure, and the maturity date on the note has passed.

    • Perhaps. However, if the recorded notice of indebtedness (DOT) does not reference a maturity date or date of final payment, the SOL is 60 years from the date of recording of the DOT. The SOL may also be extended. The SOL on the note should be distinguished from the lien created by a security interest.

      You need to review the entire code section:

      “(a) Unless the lien of a mortgage, deed of trust, or other instrument that creates a security interest of record in real property to secure a debt or other obligation has earlier expired pursuant to Section 2911, the lien expires at, and is not enforceable by action for foreclosure commenced, power of sale exercised, or any other means asserted after, the later of the following times:

      (1) If the final maturity date or the last date fixed for payment of the debt or performance of the obligation is ascertainable from the recorded evidence of indebtedness, 10 years after that date.

      (2) If the final maturity date or the last date fixed for payment of the debt or performance of the obligation is not ascertainable from the recorded evidence of indebtedness, or if there is no final maturity date or last date fixed for payment of the debt or performance of the obligation, 60 years after the date the instrument that created the security interest was recorded.

      (3) If a notice of intent to preserve the security interest is recorded within the time prescribed in paragraph (1) or (2), 10 years after the date the notice is recorded.

      (b) For the purpose of this section, a power of sale is deemed to be exercised upon recordation of the deed executed pursuant to the power of sale.

      (c) The times prescribed in this section may be extended in the same manner and to the same extent as a waiver made pursuant to Section 360.5 of the Code of Civil Procedure, except that an instrument is effective to extend the prescribed times only if it is recorded before expiration of the prescribed times.”

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