A promissory note is executed on the date it is signed, regardless of the date appearing on the face of the document, the North Carolina Court of Appeals has unanimously ruled in a case of first impression. The court reversed a trial court’s ruling that a Charlotte man’s demand for payment of a promissory note signed in 2009 was barred by the statute of limitations.
In 2006 and 2007 Robert Pedlow made several loans to a business partner, Timothy Kornegay, and in 2008, they sought to memorialize the loans in a promissory note. After several months of negotiations, they agreed that the amount owed was $84,000, and in July 2008, Pedlow’s attorney emailed a promissory note to Kornegay and requested his signature. Several more months of wrangling over the amount of the debt ensued before Kornegay ultimately signed the note in July 2009. But apparently as the result of an oversight, the note was still dated July 30, 2008.
Kornegay made no payments against the principle or interest on the loan, and in May 2019 Pedlow filed suit demanding payment of the entire balance of the promissory note. Kornegay moved for summary judgment, asserting a statute of limitations defense, and Mecklenburg County Superior Court Judge George C. Bell granted the motion. Pedlow appealed, and in a July 6 opinion, the Court of Appeals reversed and remanded.
The court’s first task was to decide what specific statute of limitations controlled. Kornegay argued that statute governing promissory notes in general should apply, but Judge Fred Gore, writing for the court, said that because the promissory note in question was executed under seal, it was subject to a ten-year statute of limitations, starting from the date that the note was executed.
That left the question of deciding when the note was executed. The state’s statutes did not address the issue, and the state’s appellate courts had never previously considered it, so Gore looked to principles of law and equity to reach the conclusion that the statute of limitations began to run only once the promissory note had been signed.
In this case, Kornegay admitted that a further dispute as to the amount owed arose between he and Pedlow in November 2008, and negotiations over the amount owed continued thereafter. That, Gore wrote, was evidence that Pedlow wouldn’t have been able to sue to enforce the promissory note as of July 2008 even if he wanted to, and the promissory note wasn’t finalized, and an action couldn’t have been brought on the note until the document was signed in July 2009.
“Further, Mr. Kornegay does not dispute, or provide evidence to the contrary, that he signed the promissory note on 2 July 2009. Therefore, because the debt was not finalized and secured until Mr. Kornegay signed and Mr. Pedlow would not have been able to sue under the promissory note until the document was signed, we find that the note was executed, and the statute of limitations began to run on the date the document was signed,” Gore wrote.
Kornegay argued that the statute of limitations should have started to run on the date appearing on the face of the promissory note because North Carolina’s version of the Uniform Commercial Code allows for an instrument to be postdated, and, he thus contended, the date appearing on the face of the document is the only date from which the statute of limitations could begin to run. Gore said that the court found this argument unpersuasive, however.
Judge Chris Dillon wrote a brief concurrence to note that, prior to the execution of the promissory note, Pedlow had a cause of action based on the original debt, and the time to bring a cause of action on a debt isn’t tolled merely because the parties disagree about the amount owed. The execution of the promissory note created a new cause of action, however, which Pedlow timely pursued.
Ken Raynor of Charlotte represented Pedlow on appeal. Raynor said that Pedlow and Kornegay started off as friends, and as a result Pedlow had initially advanced the money as an unsecured loan, and even after the promissory note was executed, he waited more than nine years before demanding repayment because of their friendship. Raynor added that the statute of limitations can’t begin to run until a person has the right to sue, and Pedlow never had right to sue on the note until Kornegay signed it.
“I think [the court’s opinion] accurately reflected the application of North Carolina law to a very unique set of facts,” Raynor said. “The reason this unusual set of facts existed, is the old cliché that no good deed goes unpunished.”
Raynor said that Bell did not provide any explanation for his decision to grant the motion for summary judgment, but that he suspects that Bell adopted Kornegay’s position that it was the date typed on note that controlled when the statute of limitations began to run.
Michael Messinger of Charlotte represented Kornegay. He could not be reached for comment.
The 10-page decision is Pedlow v. Kornegay (Lawyers Weekly No. 011-112-21). The full text of the opinion is available online at nclawyersweekly.com.
Follow David Donovan on Twitter @NCLWDonovan