The Discovery Rule: Tolling the Statute of Limitations

There is an excellent post by Michael B. Schwegler in Tennessee on the whole issue of whether the statute of limitations can be extended to the date that the breach of duty was discovered. Schwegler’s post clearly enunciates the position of the Supreme Court of Tennessee. In my opinion it also articulates the way that most courts look at tolling when it comes to mortgage litigation and the torts arising from mortgage litigation.

READ IT: Whether and How the Discovery Rule Applies

Bottom Line Practice Note: If you want to toll the statute of limitations you must assert and prove that your client could not possibly have known or found out about the breach until a date later than the the end of the statutory period.

I think this means that you should look closely to determine the first time when discovery was possible, not the actual date on which discovery was actually made.  If you can do that and prove that it was virtually impossible for the victim to have known about the breach until the X day of Y Month, in Z year, then you have an extension of the statutory period until that date or you have a statutory period that first starts to run on that date. Generally speaking the statutes are worded to favor of the latter.

Also remember that claims barred by a statute of limitations are probably NOT barred if brought as affirmative defenses, to wit: a defense claim of entitlement to recoupment.


Recoupment is the setting forth of a demand arising from the same transaction as the plaintiff’s claim, to abate or reduce that claim. It is the means used to determine the proper liability on the amounts owed. Recoupment is in the nature of a defense arising out of some feature of the transaction upon which the plaintiff’s action is grounded. Recoupment, is a creditor’s right long recognized in bankruptcy proceedings.

Recoupment asserted as a defense is not an “offset” to a claim. Recoupment is not calculated by the net amount due from one party to the other computed by subtracting one claim from the other, but rather is the amount of the plaintiff’s claim alone on a particular contract, transaction or event. An offset or setoff can be money owed from any matter, including outside the lawsuit. Recoupment is a defense that goes to the foundation of plaintiff’s claim by deducting from plaintiff’s recovery all just allowances or demands accruing to the defendant with respect to the same contract or transaction.



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