What Attorneys Should Know About Debt Revival in Washington StateDecember 5, 2017 / byPuget Sound Life / Categories : Puget Sound General
John Doe Inc. (“JDI”), a fictional Washington business, received bad legal advice on a commonly misunderstood subject–the statute of limitations on old debts. A lawyer told the company not to bother pursuing legal action against large accounts that had initially fallen into default six-plus years ago. According to the attorney, “since the account holders initially defaulted more than six years ago, the statute of limitations would time bar your claims.”
The lawyer’s advice was flat wrong in this situation, and the bad advice potentially cost JDI the value of the large accounts against which JDI still had valid claims. The advice was wrong because of sporadic partial payments on the past-due accounts. The account holders’ partial payments to JDI likely removed any time bar on the contemplated collection lawsuits.
In Washington, the statute of limitations on a contract lawsuit refreshes each time the debtor makes a partial payment to the creditor. Washington’s legislature codified this legal principal under RCW 4.16.270, also known as the ‘partial payment statute’ or ‘debt revival statute.’ The partial payment statute reads as follows:
When any payment of principal or interest has been or shall be made upon any existing contract, whether it be a bill of exchange, promissory note, bond or other evidence of indebtedness, if such payment be made after the same shall have become due, the limitation shall commence from the time the last payment was made.
Early 20th century case law stemming from J.M. Arthur & Co. v. Burke, 83 Wash. 690 (1915) made it very difficult for creditors to prove qualifying partial payments for purposes of debt revival. But a pair of 1950s Washington Supreme Court cases impliedly abrogated or restricted Arthur and its progeny. The watershed moment was the Supreme Court case Wickwire v. Reard, 37 Wn.2d 748, 751-59 (1951). There the Washington Supreme Court factually differentiated Arthur and numerous other cases that had set high evidentiary burdens for partial payment arguments. Four years later-1955-the Washington Supreme Court’s opinion in Keen v. O’Rourke, 48 Wn.2d 1, 2-4 (1955) further limited Arthur and its progeny in dicta. The Keen Court suggested the line of holdings from Arthur should be constrained to their “peculiar” facts because they had involved scenarios strongly indicating no qualifying payments had been made.
Since the 1955 Keen case, it appears no Washington appellate opinion, published or otherwise,has dealt with a challenge to the sufficiency of evidence in a partial payment argument. See, e.g., Hamilton v. Pearce, 15 Wn.App. 133, 135-39 (1976); Hopper v. Hemphill, 19 Wn.App. 334, 336 (1978); Watters v. Doud, 92 Wn.2d 317, 319-21 (1979); Greer v. Whatcom Meadows Camping Ass’n, 84 Wn.App. 1101 (1997); Nilson v. Castle Rock Sch. Dist., 88 Wn.App. 627, 631(1997); Citibank S. Dakota, N.A. v. Cramer, 139 Wn.App. 1089 (2007); Hansen v. Anderson, 147 Wn.App. 1009 (2008). The watershed Wickwire and Keen cases seem to have sufficiently signaled the end of abnormally high evidentiary expectations in partial payment cases.
Savvy creditors and Washington business attorneys have more reason than ever to consider the partial payment statute before abandoning old debts.
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