Renewal of Statute of Limitations through Partial Payments and Enforceability of Internal ADR Provisions in Trust Agreements

Introduction

Matter of Borgia v. SCO Family of Services, 2025 NYSlipOp 01801 (2nd Dept. Mar. 26, 2025), arose from a petition under CPLR 7601 seeking enforcement of an internal dispute‐resolution procedure in the bylaws of the Roman Catholic Diocese of Brooklyn Workers’ Compensation Trust. In 2006, SCO Family of Services (“SCO”) joined the Trust and agreed to its bylaws. After SCO’s membership ended in 2007 and the Trust closed in 2008, the Trustees assessed a $3.45 million deficit against former members, including SCO. SCO made partial payments in 2011 and 2014 while disputing the calculation. In 2019, the Trustees invoked the “Member Disputes” procedure, and when SCO did not engage, they petitioned to compel resolution. The Supreme Court dismissed the petition on statute‐of‐limitations grounds. The Appellate Division reversed and remanded.

Summary of the Judgment

The Appellate Division held that:

Whether SCO’s 2014 $300,000 payment restarted the six-year statute of limitations is a question of fact, because it depends on whether the payment was an unconditional acknowledgement of the full debt.
If the parties agreed to a multi-year installment plan, each missed installment gives rise to a new breach and a fresh limitations period; but it is unclear as a matter of law that SCO assented to the five-year plan.
The “Member Disputes” provision is not void as against public policy merely because Trustees sit on the subcommittee—internal ADR provisions remain enforceable when judicial review is preserved under CPLR 7601.

Accordingly, the dismissal for expiration of the statute of limitations was premature, and the matter was remitted for a hearing on that affirmative defense and a new determination of the petition.

Analysis

Precedents Cited

CPLR 213(2): Six-year statute of limitations for breach of contract.
Kimso Apts., LLC v. Gandhi, 129 AD3d 670 (2nd Dept. 2015): Application of CPLR 213(2).
Costello v. Curan & Ahlers, LLP, 224 AD3d 734 (2nd Dept. 2023): Accrual date and partial payment effect on limitations.
Roth v. Michelson, 55 NY2d 278 (1982): Partial payments restart limitations only if accompanied by an unconditional promise to pay the balance.
Lew Morris Demolition Co. v. Bd. of Educ., 40 NY2d 516 (1976): Circumstances required to infer a promise from a partial payment.
Student Loan Sols., LLC v. Colon, 231 AD3d 991 (2nd Dept. 2023): Each missed installment in a payment plan constitutes a new breach.
CSEA Empl. Ben. Fund v. Warwick Valley Cent. Sch. Dist., 36 AD3d 582 (2nd Dept. 2007) and Beller v. William Penn Life Ins. Co., 8 AD3d 310 (1st Dept. 2004): Fresh accrual for missed installments.
Yonkers Contr. Co. v. Port Auth. Trans‐Hudson Corp., 87 NY2d 927 (1996); Westinghouse Elec. Corp. v. NYCTA, 82 NY2d 47 (1993); Matter of Astoria Med. Group [Health Ins. Plan], 11 NY2d 128 (1962): Freedom to agree on ADR process and even interested arbitrators, subject to judicial review.

Legal Reasoning

The court first addressed accrual and renewal of the Trustees’ breach‐of‐contract claim. A contract claim accrues when the plaintiff has a right to demand payment. Here, the Trust’s right matured in April 2010 when the assessment was billed. Because more than six years elapsed before initiating the CPLR 7601 proceeding, the Supreme Court found the claim time‐barred. On appeal, the Trustees argued that SCO’s 2014 partial payment renewed the limitations period. Under Roth and Lew Morris, partial payment restarts the clock only if it shows an “absolute and unqualified” acknowledgment of the remaining debt. The Appellate Division held that the record—consisting of SCO’s letters disputing the assessment—raises a question of fact as to whether the 2014 payment was conditioned on verifying the debt. If so, it would not reset the limitations period.

The court then considered installment payments. If the parties had validly agreed to a five-year payment plan, each missed annual installment after October 2013 would constitute a timely claim. However, the bylaws capped installments at one year, and there was no clear evidence of a binding five-year agreement. Thus, the existence and terms of any installment plan must also be resolved at a fact hearing.

Finally, SCO contended the “Member Disputes” clause contravened public policy by allowing Trustees to adjudicate disputes in which they had an interest. Citing Yonkers Construction, Westinghouse, and Astoria Medical Group, the court reaffirmed that New York law permits parties to select arbitrators—even if affiliated with one side—so long as the arbitration award (or adjudication) remains subject to judicial oversight under CPLR 7601. The provision therefore is enforceable.

Impact

This decision provides critical guidance for contract disputes in the group‐insurance and self‐insurance trust context:

Partial payments do not automatically restart the statute of limitations. Courts will examine the circumstances surrounding each payment to determine whether it constituted an unconditional acknowledgment of the full debt.
In installment agreements, failure to pay each installment gives rise to a separate breach and limitations period, but the existence of a binding multi‐year plan must be clearly demonstrated.
Trusts and similar entities may structure internal dispute‐resolution procedures and select well-informed decision-makers from their boards, without fear that such provisions are per se void as against public policy—so long as CPLR 7601 judicial review remains available.

Going forward, litigants must gather detailed evidence about payment negotiations and plan terms, and consider ADR provisions enforceable subject to court supervision.

Complex Concepts Simplified

Accrual of Contract Claims: A claim “accrues” when the plaintiff has a legal right to demand performance—typically, when payment becomes due.
Renewal by Partial Payment: A partial payment can restart the limitations clock only if the debtor admits the entire debt remains and promises unconditionally to pay the balance.
Installment Contracts: Each required installment is its own obligation; missing one installment gives rise to a fresh breach and fresh six-year limitations period for that installment.
Alternative Dispute Resolution (ADR): Contractual methods—such as mediation or arbitration—chosen by parties to resolve disputes outside a traditional courtroom.
Judicial Review under CPLR 7601: Even if parties agree to internal ADR, New York law allows courts to enforce those agreements and review the outcome to ensure fairness and legal compliance.

Conclusion

Matter of Borgia v. SCO clarifies two interrelated areas of New York contract law. First, it emphasizes that courts must scrutinize the context of partial payments and installment arrangements before ruling on statute‐of‐limitations defenses. Second, it reaffirms the strength of consensual ADR: parties remain free to choose in-house or affiliated decision-makers, provided a safety valve of judicial oversight exists. This ruling will shape how contracts are negotiated, documented, and litigated in contexts where ongoing obligations and internal dispute mechanisms are common.