Legal Question in Business Law in California

6 years ago, three non profit organizations had a "Merger of Equals" and became a new non profit organization. I have just received a check written by one of those original three organizations that is now 7 years old. The recipient says they just found it, and wants a new check issued and mailed to them. As the new organization, do I have any obligation to re-issue that 7 year old check?

Asked on 7/02/13, 1:33 pm

4 Answers from Attorneys

Timothy McCormick Libris Solutions - Dispute Resolution Services

Probably not, just based on statutes of limitations on whatever the check was for. Limitations periods aside, however, generally a merger whether non-profits or for profits involves either the surviving or new entity assuming the liabilities of the absorbed company, unless assets are liquidated and all debts paid at closing. You can't just merge your debts and obligations out of existence. Absent merger terms on how the debts are assumed, you "follow the money." Whatever entity took the assets of the dissolved or absorbed entity is liable for the debts up to the value of the assets received.

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Answered on 7/02/13, 1:56 pm

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

You may have a moral obligation, or a practical business obligation, to honor or to re-issue the check, or otherwise settle up the indebtedness or whatever that the check was given for in the first place. However, especially if you now hold the check, any legal obligation you might have to satisfy the indebtedness (by honoring the check, reissuing it, or paying up in any other way) is probably terminated by one or another of the statutes of limitations. Statutes of limitations generally provide that someone who is going to sue to enforce an obligation must bring suit within X years of the time the suit first could have been brought. For obligations based on a written contract, the time "X" is four years. This mode of causing obligations to expire has nothing to do with mergers; it would come into play even if your organization hadn't merged, and in fact, mergers don't ever wipe out debts.

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Answered on 7/02/13, 2:59 pm
Keith E. Cooper Keith E. Cooper, Esq.

The check is definitely stale and would not be honored at the bank. Apart from the statute of limitations issues raised by other respondents here, there is another issue: you have no way of knowing whether a replacement check was previously issued. If the check were really lost 7 years ago and the person expected to be paid, there is a strong likelihood they would have asked at the time for a replacement check and received one. Before you communicate with this person, be aware that if you reaffirm with the other party that the money was owed and a replacement check is due, you have created a new debt and the statute of limitations would begin again.

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Answered on 7/03/13, 3:58 pm
John Laurie Gertz and Laurie

I find it suspicious that this comes up after 7 years.

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Answered on 7/03/13, 10:38 pm

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