FACTS

In November 2011, defendant Delta Tech Industries, LLC (Delta) opened a

$300,000 line of credit with a bank by executing a “Stand-Alone Revolving Note.”

Durian signed the loan documents on behalf of Delta. Although Delta’s assets secured

the loan, Durian also personally guaranteed payment.

Delta, Durian, and the bank agreed to amend the loan in November 2012 and again

in February 2013. Under the February 2013 amendments, the loan—by then a “Demand

Line of Credit Note”—was reduced to $150,000, with interest payments due monthly and

the principal payable on demand. Durian also reaffirmed his personal guaranty.

Delta ceased operations at the end of 2016. At about that time, defendant

Durimex, Inc. (Durimex), another entity Durian controlled, began using Delta’s

remaining inventory and assets, including the Delta name.

When Delta ceased operations, it also ceased making loan payments. Durian made

an interest payment using a Durimex check on December 29, 2017. The bank also

credited three later, similar payments—on April 10, 2018, May 11, 2018, and June 17,

2019—toward Delta’s loan. According to Durian, those three later payments should have

been applied to a Durimex account but were misallocated. In deposition testimony that

2 was admitted without objection at trial, however, Durian conceded that as to the

December 2017 payment “we used the Durimex check . . . to make a payment towards

the old loan . . . interest.”

On February 5, 2019, the bank sent Delta a letter demanding payment in full of the

loan, including $131,472.46 in unpaid principal.

The bank sold the loan in December 2019, and it passed in a series of assignments

to plaintiff and respondent NG Solutions, LLC (NG Solutions) in December 2023.

Meanwhile, on September 13, 2021, NG Solutions’ predecessor in interest filed

this lawsuit. The complaint alleges a single cause of action for breach of contract based

on the defendants’ failure to repay principal and interest on the loan. The complaint

alleges an outstanding principal balance of $131,472.46, plus interest of $34,081.87 as of

the filing of the complaint and continuing to accrue.

The defendants’ default was entered in July 2022, and in November 2022 the trial

court entered a $222,993.18 default judgment against all defendants jointly and severally.

In February 2023, the trial court granted Durian and Durimex’s motion to set aside the 1 default and default judgment, leaving the default judgment in effect as to Delta.

Durimex and Durian answered the complaint. In July 2023, however, the trial

court struck Durimex’s answer and entered its default after its counsel withdrew and it

1 Separately, the court ordered Durian and Durimex to remain jointly and severally liable together with Delta for $29,119.50 in attorney fees that were part of the original default judgment.

3 failed to obtain new counsel despite repeated warnings that Durian, who is not an

attorney, could not appear on Durimex’s behalf.

In May 2024, the trial court held a bench trial as to Durian and, jointly, a default

prove-up as to Durimex. The court ruled the six-year statute of limitations for a claim on

a negotiable instrument under Commercial Code section 3118, subdivision (a), applied to

plaintiff’s claim. Based on “[p]ayments . . . made on the negotiable instruments in

December 2017” and the February 5, 2019 demand for payment “making the principal

due at that time,” the court found the September 2021 complaint was timely filed. It

found Delta and Durian had breached the loan terms by failing to pay, and Durian was

liable for damages based on his personal guaranty. The court found Durimex was not

liable for damages, rejecting the plaintiff’s “alter ego theory” as to that entity. The court

entered judgment against Durian for $222,993.18, based on the same calculation as the

November 2022 default judgment. The court also found plaintiff entitled to $32,868 in

interest accruing since November 2022.

DISCUSSION

Durian argues the trial court erred by treating Delta’s line of credit as a negotiable

instrument and accordingly applying the six-year statute of limitations of Commercial

Code section 3118, subdivision (a), rather than the four-year statute of limitations

generally applicable to written contracts under Code of Civil Procedure section 337. We

decline to address that issue because it makes no difference to the outcome of this appeal.

Under either limitations period, the lawsuit was timely filed.

4 The courts and the Legislature have “over time developed . . . equitable

exceptions to and modifications of the usual rules governing limitations periods.” (Aryeh

v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1192.) One such modification

is that “part payment of a debt or obligation is sufficient to extend the bar of the statute

[of limitations].” (Martindell v. Bodrero (1967) 256 Cal.App.2d 56, 59.) Code of Civil

Procedure section 360 provides that “any payment on account of principal or interest due

on a promissory note made by the party to be charged shall be deemed a sufficient

acknowledgment or promise of a continuing contract to stop, from time to time as any

such payment is made, the running of the time within which an action may be

commenced upon the principal sum or upon any installment of principal or interest due

on such note, and to start the running of a new period of time, but no such payment of

itself shall revive a cause of action once barred.” The theory underlying this partial

payment doctrine “is that the payment is an acknowledgment of the existence of the

indebtedness which raises an implied promise to continue the obligation and to pay the

balance.” (Martindell, at p. 59.) A related equitable principal is that a person “‘cannot

justly or equitably lull his adversary into a false sense of security and thereby cause him

to subject his claim to the bar of the statute of limitations, and then be permitted to plead

the very delay caused by his conduct as a defense to the action when brought.’” (County

of Santa Clara v. Vargas (1977) 71 Cal.App.3d 510, 525 (County of Santa Clara),

quoting Estate of Pieper (1964) 224 Cal.App.2d 670, 690.)

5 Durian, using a Durimex check, made an interest payment on Delta’s line of credit

in December 2017. Under the partial payment doctrine codified in Code of Civil

Procedure section 360, this payment reset the statute of limitations on plaintiff’s claim.

Common law equitable principles lead to the same conclusion, as the bank reasonably

interpreted this payment as an indication that Durian intended to stand by his personal

guarantee of Delta’s obligations. (See County of Santa Clara, supra, 71 Cal.App.3d at p.

525.) Under the modified terms of the loan, the principal was due only on demand,

which was made in February 2019. This lawsuit was filed in September 2021, which is

less than four years after December 2017, let alone February 2019. Thus, under either a

four-year or a six-year statute of limitations, the lawsuit is not time barred.

DISPOSITION

The judgment is affirmed. NG Solutions is awarded costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

RAPHAEL

J.

We concur:

MILLER

Acting P. J.

LEE

J.

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