11 January 2021 / Nicholas K. Rohner

Supreme Court of Indiana Harmonizes Statutes of Limitations for Closed Installment Contracts

In February 2020, the Supreme Court of Indiana issued its decision in Blair v. EMC Mortgage, which harmonizes the Statutes of Limitations (SOLs) for closed installment contracts. 

There are two SOLs governing closed installment contracts.  I.C. 34-11-2-9 is the general SOL for “actions upon promissory notes…or other written contracts for the payment of money.”  This statute requires that an action must be brought within six (6) years after the cause of action accrues.  

Indiana has also adopted the relevant Uniform Commercial Code (UCC) SOL, I.C. 26-1-3.1-118(a), which governs “an action to enforce the obligation of a party to pay a note payable at a definite time.”  This statute requires that an action to enforce a note must be commenced within six (6) years after the due date (maturity date) or within six (6) years after acceleration, whichever is earlier.

In the Blair opinion, the Supreme Court first distinguished closed installment contracts from open accounts.  Closed installment contracts, such as promissory notes and other installment loans, contemplate payment of a certain sum over a fixed period of time.  Credit cards and other open accounts have fluctuating balances and these accounts are kept open indefinitely in anticipation of future transactions.  While prior appellate decisions had focused on the date of default as the proper triggering event for an SOL on both an open account and a closed installment contract, the Blair Court changed the course for closed installment contracts.

The Supreme Court concluded that Indiana’s two applicable SOLs recognize three events triggering the accrual of a cause of action for payment upon a closed installment contract containing an optional acceleration clause:

(1) A lender can sue for a missed payment within six years of a borrower’s default;
(2) A lender can exercise its option to accelerate and must then bring a cause of action within six years of that acceleration date; or
(3) A lender can opt not to accelerate and can then sue for the entire amount owed within six years of the contract’s maturity date.

Blair is a well-written, well-reasoned decision that provides clarity for debtors and creditors on this issue.  Please note that Blair and the subject SOLs do not apply to all debt contracts.  For example, a retail installment contract, which is commonly used in auto financing, is still governed by the four-year limitations period set forth in I.C. 26-1-2-725(1).  Thus, it is important to seek advice from your counsel before making any final determination on the appropriate SOL for a debt instrument in Indiana.  

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

Related News

Insights / 5 January 2021

Stimulus Funds Directly Deposited into Savings/Checking Accounts are Exempt from Execution

On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021 (Act), which has since been signed by the President. Under the terms of the Act, individual taxpayers will be receiving a second round of stimulus funds.
Read More
Alerts / 5 January 2021

The Supreme Court of Ohio Upholds the Validity of Statutory Language in Cognovit Notes

In Sutton Bank v. Progressive Polymers, LLC et al., 2020 Ohio 5101, the court reversed a decision from the Eleventh District Court of Appeals and held that a cognovits note provision was not defective.
Read More
News / 4 January 2021

Weltman, Weinberg & Reis Co., LPA Attorneys Named to the 2021 Ohio Super Lawyers List

We are honored to announce three of our attorneys were named to the 2021 Ohio Super Lawyers list, with an additional two attorneys being named to the 2021 Ohio Rising Stars list.
Read More

Join Our Email List

Get the latest articles and news delivered to your email inbox!

Contact the Author

Nicholas K. Rohner


Join Our Email List