First Tennessee Bank Nat. Assn. v. Newham
859 N.W.2d 569
Neb.2015Background
- Newham executed a California-secured promissory note in 2005 and stopped payments in August 2007; First Tennessee (successor to the original lender) sued in August 2013.
- The parties agreed California law applied and that the applicable limitations period was 4 years under Cal. Civ. Proc. Code § 337; First Tennessee’s suit was filed nearly six years after breach.
- First Tennessee argued the limitations period was tolled either by Cal. Civ. Proc. Code § 351 (tolling while a defendant is out of state) or by the Servicemembers Civil Relief Act (SCRA), 50 U.S.C. app. § 526(a) (tolling during servicemembers’ military service).
- The district court granted Newham summary judgment, holding § 351 could not be applied to a nonresident without violating the Commerce Clause and concluding § 526(a) did not apply because Newham was not in federal active duty.
- On appeal, the Nebraska Supreme Court affirmed: § 351 could not constitutionally toll the period against a nonresident who permanently left California, and there was no evidence Newham’s National Guard service met the SCRA definitions that would toll the statute.
Issues
| Issue | Plaintiff's Argument (First Tennessee) | Defendant's Argument (Newham) | Held |
|---|---|---|---|
| Whether Cal. Civ. Proc. Code § 351 tolled the limitations period | § 351 tolls time while defendant is absent from California, so limitations should be tolled | Applying § 351 to a nonresident who left California violates the Commerce Clause and cannot be used to deny the limitations defense | Held: § 351 cannot be applied to toll against Newham; doing so would impermissibly burden interstate commerce |
| Whether SCRA 50 U.S.C. app. § 526(a) tolled the limitations period | Newham’s National Guard service was full-time and thus tolls limitations under § 526(a) | Newham’s service was state-level full-time National Guard duty (not federal active duty) and he was not called to federal active service as SCRA requires | Held: § 526(a) does not apply—Newham was not on federal active duty nor shown to have been called under the limited § 511(2)(A)(ii) criteria |
Key Cases Cited
- Bendix Autolite Corp. v. Midwesco Enterprises, 486 U.S. 888 (1988) (state tolling statute that disadvantages out-of-state defendants can violate the Commerce Clause)
- Heritage Marketing Servs. v. Chrustawka, 160 Cal. App. 4th 754 (2008) (Cal. Court of Appeal: § 351 cannot be applied against former residents who moved out of state without violating Commerce Clause)
- Dan Clark Family Ltd. v. Miramontes, 193 Cal. App. 4th 219 (2011) (Cal. Court of Appeal: § 351 cannot be applied to nonresident defendants who moved out of state)
- Filet Menu, Inc. v. Cheng, 71 Cal. App. 4th 1276 (1999) (Cal. Court of Appeal: § 351 application to residents who briefly travel outside state differs from application to nonresidents)