Opinion ID: 1851937
Heading Depth: 1
Heading Rank: 5

Heading: determination of adequate protection

Text: Section 3-309(b) provides that a court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. The comment to § 3-309 provides: The court is given discretion in determining how adequate protection is to be assured.... Under section 3-309 adequate protection is a flexible concept.... [T]he type of adequate protection that is reasonable in the circumstances may depend on the degree of certainty about the facts in the case. In this case, by the time the court entered a judgment on the verdict, 5 years had passed since the notes were executed. The court concluded that it was highly unlikely a stranger in possession of the notes would have waited that long to attempt to enforce them. Nonetheless, the court recognized that the notes were negotiable and took the additional precaution of withholding the judgment from Fales until the statute of limitations for enforcing the notes had expired, or January 16, 2003. Given the status of the estate, the court's purported use of the statute of limitations for adequate protection was a reasonable exercise of its discretion. However, contrary to Fales' contention, the applicable statute of limitations for negotiable instruments is not governed by Neb.Rev.Stat. § 25-205 (Reissue 1995). That section imposes a time limitation for actions on a written contract. Under Neb. U.C.C. § 3-118 (Reissue 2001), an action to enforce the obligation of a party to pay a negotiable instrument must be commenced within 6 years of the due date or the accelerated due date stated in the note. We conclude that the judgment should be withheld from Fales until January 16, 2004, or 6 years from the date the notes were due. The court's judgment is corrected to that extent. See First Constr. Co. v. Tri-South Mortg. Investors, 308 N.W.2d 298 (Minn.1981) (concluding that trial court erred in failing to extend surety's liability for indemnification bond until statute of limitations for enforcing note had expired).