California Legal Brief

The Rule of Dawadi v. Adhikari is that check memo line annotations do not constitute sufficient written acknowledgment to revive a time-barred debt, under circumstances where the debtor explicitly refused to guarantee the debt, denied borrowing the money, and the annotations merely identify a payee for accounting purposes without constituting an unqualified admission of a subsisting obligation.

Appeal from judgment of dismissal after sustaining demurrer without leave to amend in Superior Court, San Diego County.

Defendant Appellant was Bhaskar Dawadi — the lender who made a written loan in January 2015 with a one-year repayment term.

Plaintiff Respondent was Prasanna Adhikari — the borrower through his corporation Pradhi, Inc. who made three $1,000 payments beginning in June 2021, over five years after the loan was due.

The suit sounded in breach of contract. There was also a fraud in the inducement claim.

The key substantive facts leading to the suit were: Dawadi loaned money to Adhikari's corporation in January 2015 under a written agreement requiring repayment within one year at zero percent interest. Adhikari made no payments during the one-year period ending January 2016. Beginning in June 2021, Adhikari made three $1,000 payments, with the first two checks noting "BR Dawadi-Pradhi Loan Payment" in the memo section. Adhikari subsequently denied ever borrowing the money and refused Dawadi's request for a personal guarantee.

The procedural result leading to the Appeal: The trial court sustained the demurrer without leave to amend on statute of limitations grounds, ruling that the four-year statute of limitations had run by January 2020, that the 2021 payments could not revive the barred claim under Code of Civil Procedure section 360, and that Western Coal was distinguishable because it involved a subsequently executed written agreement between parties, not check annotations.

The key question(s) on Appeal: Whether check memo line annotations constitute sufficient written acknowledgment of a time-barred debt to create a new contract and revive the barred cause of action.

The Appellate Court held that check annotations identifying a payee and categorizing a transaction for accounting purposes do not constitute the "direct, unqualified, and unconditional admission of a debt" required to revive a time-barred obligation, particularly where the debtor explicitly refused to guarantee the debt and subsequently denied borrowing the money.

The case is inapplicable when the debtor makes an unqualified written acknowledgment that constitutes a direct admission of the debt without qualifying expressions or circumstances that repel the idea of an intention to pay, or where the parties execute a new written agreement signed by both parties that expressly references the underlying obligations.

The case leaves open what specific language in check memo lines might constitute sufficient written acknowledgment, and whether different surrounding circumstances (such as lack of denial or explicit assumption of debt) might change the analysis.